Judicial Business:

Statement--Royal Commission on House of Lords Reform

Lord Bingham of Cornhill: My Lords, with the leave of the House, before the reports from the Appellate Committees are considered, I should like to make a Statement on Recommendation 59 of the Royal Commission on the Reform of the House of Lords. That recommendation is that:
	"The Lords of Appeal should set out in writing and publish a statement of the principles which they intend to observe when participating in debates and votes in the second chamber and when considering their eligibility to sit on related cases".
	I should tell the House that my noble and learned friends have considered this recommendation and have agreed on the terms of a Statement to give effect to it. I will now read the Statement which has been agreed by all the Lords of Appeal in Ordinary: General Principles
	"As full members of the House of Lords the Lords of Appeal in Ordinary have a right to participate in the business of the House. However, mindful of their judicial role they consider themselves bound by two general principles when deciding whether to participate in a particular matter, or to vote: first, the Lords of Appeal in Ordinary do not think it appropriate to engage in matters where there is a strong element of party political controversy; and secondly the Lords of Appeal in Ordinary bear in mind that they might render themselves ineligible to sit judicially if they were to express an opinion on a matter which might later be relevant to an appeal to the House.
	"The Lords of Appeal in Ordinary will continue to be guided by these broad principles. They stress that it is impossible to frame rules which cover every eventuality. In the end it must be for the judgment of each individual Lord of Appeal to decide how to conduct himself in any particular situation. Eligibility
	"In deciding who is eligible to sit on an appeal, the Lords of Appeal agree to be guided by the same principles as apply to all judges. These principles were restated by the Court of Appeal in the case of Locabail (UK) Ltd v. Bayfield Properties Ltd and others and four other actions [2000 1 All E.R. 65 (CA)]."
	My Lords, that concludes the Statement. I recognise, of course, that this is a subject on which noble Lords may wish to express a view, but I hope that the House will agree that it would not be appropriate to enter into a debate now, at a judicial sitting. What I have done is to report to the House what the Lords of Appeal in Ordinary have agreed. If any noble Lord wishes to explore the matter further, then I am sure that a debate can be arranged through the usual channels. [The House then considered and agreed to the reports from the Appellate Committees in the Causes Wildtree Hotels Limited and others (Appellants) v. London Borough of Harrow (Respondents) and Regina v. Z (Respondent) (On Appeal from the Court of Appeal (Criminal Division)). The sitting was then suspended until three o'clock.]
	The LORD CHANCELLOR on the Woolsack.

NHS: Additional Resources

Lord Clement-Jones: asked Her Majesty's Government:
	What proportion of the additional resources allocated to the National Health Service by the Budget have been devoted to the accumulated deficits and debts of health authorities and trusts.

Lord Hunt of Kings Heath: My Lords, it is not the case that the additional resources provided are being used to clear past deficits. The new resources will help the NHS achieve financial stability and provide additional services as part of the Government's agenda to develop the NHS.

Lord Clement-Jones: My Lords, I thank the Minister for that reply. In light of the fact that we expect shortly a new national plan for the NHS, it is vital to be clear about the state of NHS finances. It is estimated that the current accumulated deficit of the NHS is between £500 million and £1 billion. If, as the Minister states, the deficit is not being paid off by the new resources, how is it being paid off? Was it paid off last year by cutting services?

Lord Hunt of Kings Heath: My Lords, no. The £1 billion, to which the noble Lord refers constantly, is, as I have said on many occasions, a gross over-estimate. The fact is that the accumulated deficit to which he refers is not a debt payable on demand. It is a product of good accounting practice that requires the NHS to recognise future liabilities. Much of that liability arises in relation to potential clinical negligence liability.
	As regards the position this year, the injection of the first £600 million of extra resources will ensure that we have financial stability, meet identified pressures and develop services for the public.

Baroness Gardner of Parkes: My Lords, can the Minister tell us how many individual trusts and health authorities are in deficit?

Lord Hunt of Kings Heath: My Lords, the position with regard to individual organisations for the past financial year will not be clear until the autumn when we have their accounts fully to order. I understand that at the end of the last financial year, the deficit is estimated to be approximately £200 million. But we need to put that in perspective. The amount of additional resources that we are putting into the health service this year is £1.424 billion.

Lord Clark of Kempston: My Lords, does the Minister agree that, if the debts remain, presumably those trusts are paying interest on them? That decreases the amount of money available for health services. If there is a debt it is surely good accounting practice that some plan should be evolved in order to eliminate that debt and the liability for interest?

Lord Hunt of Kings Heath: My Lords, I thought that I had made it clear that the accumulated debt to which the noble Lord, Lord Clement-Jones, refers is not a debt payable on demand but an understanding that we have to recognise potential future liabilities such as clinical negligence.

Lord Swinfen: My Lords, what is the position when no allowance is made for future payments which might have to be made? What is the actual financial position of the National Health Service?

Lord Hunt of Kings Heath: My Lords, the financial position of the NHS is healthy due to the resources that we have put into the health service as a result of the last Budget. In terms of the announcement made in the Budget for the financial years 2001-02 to 2004-05, the additional resources amount to 6.3 per cent real term growth. At the end of that four-year period, that will allow the health service to have grown by an additional one third in real terms. That surely is the point. That is the recognition which the Government have demonstrated in their additional finances for the health service.

The Countess of Mar: My Lords, is the Minister saying that it is a paper debt rather than a real debt? If that is so, what is the National Health Service doing to make doctors safer and so reduce prospective claims for clinical negligence?

Lord Hunt of Kings Heath: My Lords, the noble Countess is right to refer to the worrying rise in clinical negligence liabilities. This has to be tackled in a number of ways: by the strengthening of clinical governance, as we have done; and the combined effect of the establishment of the Commission for Health Improvement and the National Institute for Clinical Excellence which will help to drive up standards.
	I refer also to the new statutory duty of quality on the chief executives of NHS trusts which ensures that the chief executives and the boards have responsibility not just for management and financial issues, but for the overall quality of service within an individual NHS organisation.

Lord Crickhowell: My Lords, does the financial information that the Minister gave us apply to England, or to the health service in England, Scotland and Wales? We had an Answer yesterday indicating that the noble Lord was not responsible for Wales. We should be able to ask questions concerning the health service as a whole and to be clear on whether the answers represent only part or the whole of the United Kingdom.

Lord Hunt of Kings Heath: My Lords, the answers I have given today relate to England because that is my responsibility.

Earl Howe: My Lords, the Minister was unable to give a precise answer to my noble friend Lady Gardner. Has the noble Lord figures for the previous financial year?
	Is the noble Lord aware that the Answer he gave to the noble Lord, Lord Clement-Jones, will baffle many people. Has the Minister read, as I have, interviews with doctors from numerous PCGs around the country all telling the same story: that a large part of the £600 million which the Secretary of State said would tackle waiting lists, winter pressures and prevent bed blocking has been swallowed up by paying off hospital debts? How does he explain those statements?

Lord Hunt of Kings Heath: My Lords, that is not the case. Some of that £600 million has been used to fund the provision of care which might have been financed from running up debts because of the pressures on the health service. However, the additional resource has enabled agreement at local level as to how those services are to be provided. It has also enabled us to meet identified pressures for the winter and to develop many of our services.
	I think that noble Lords are being somewhat churlish in relation to the issue when one considers the extraordinary amount of additional resources that this Government are putting into the National Health Service.

Army: Response to Bullying Complaints

Lord Ashley of Stoke: asked Her Majesty's Government:
	What evidence they have of bullying in the Army; and what steps they are taking to eliminate it.

Baroness Symons of Vernham Dean: My Lords, the Army does not tolerate any form of harassment. All allegations of ill treatment are thoroughly investigated with appropriate disciplinary action taken. A number of measures have been introduced to enforce the policy of zero tolerance, including information on how to complain, a confidential telephone support line and equal opportunities material to explain the position of the Army on these issues. These measures are, of course, kept under review and are re-focused as necessary.

Lord Ashley of Stoke: My Lords, I am grateful to my noble friend for that reply. Does she agree that a call to tackle bullying is not a call for "soft soldiers"? Perhaps I may ask her a question of which I have given notice. Is she aware of the statement made to me in a Written Answer on 7th June 1988 in the other place to the effect that the Ministry of Defence was introducing a comprehensive programme in regard to bullying? Some 10 measures were involved, including the formal banning of improper initiation ceremonies. Has that programme been implemented? If so, in view of the fact that allegations of bullying and brutality are still being made, what further steps can the Government take?

Baroness Symons of Vernham Dean: My Lords, I agree wholeheartedly that such measures are not ones that will lead to "soft soldiers", to use my noble friend's term. I am aware of the statement made in 1988, as the noble Lord was kind enough to give me notice of his question.
	In addition to the banning of initiation ceremonies, we have established additional posts in training organisations to allow officers and NCOs to devote more time to their supervisory role. There is guidance on how to complain about bullying. People can go not only to the commanding officer but to equal opportunities officers, the medical officer or the padre, and in the past 18 months a confidential telephone line has been introduced so that individuals can discuss these issues and seek advice. In addition, in February we published two booklets for all ranks providing specific advice, inter alia, about bullying.

Lord Chalfont: My Lords, does the Minister agree that it is possible to go slightly "over the top" on this matter? Life in the Army--I do not know why, of the three services, the Army has been selected for this Question--has always been fairly rugged. There has been a certain amount of what the Americans call "hazing", which is not quite the same as bullying as we understand it. Does the Minister further agree that, in contemplating this issue, if we are talking about actual ill-treatment and denial of human rights, we can take a little too tragically the subject of so-called bullying in the services?

Baroness Symons of Vernham Dean: My Lords, in theory the noble Lord has to be right. It is possible to go over the top about virtually anything. The use of physical strength or the abuse of authority to intimidate or victimise others or to give unlawful punishment is unacceptable behaviour which will not be tolerated in the Army. That is very different from a regime which allows for operational effectiveness, which--I agree wholeheartedly with the noble Lord--is essential. Those in the Army do have to be physically robust and, where necessary, to display controlled aggression. I believe that those factors are properly spelt out in various ways, particularly in the Values and Standards pamphlets that have been circulated round the Army. If the noble Lord wishes, I will send him copies of those pamphlets; and I hope he will agree with me that they certainly do not go over the top.

The Lord Bishop of Oxford: My Lords, I wonder whether there is any evidence of an actual increase in bullying in the armed services since the time when many noble Lords served in Her Majesty's Armed Forces, or whether, today, we simply have a heightened consciousness of bullying that has always taken place in some form or another. If there is evidence of an increase, do we have any understanding of the causes?

Baroness Symons of Vernham Dean: My Lords, alas, I am not able to tell the right reverend Prelate how the statistics are moving because statistics relating to this matter were not kept until December 1997. However, I can supply figures for the complaints investigated since that time. In 1997 there were 118 complaints; in 1998, 100; and in 1999, 51. So far this year 16 complaints have been investigated. That indicates a downward trend in investigations, but not necessarily in complaints. We know, for example, that there have been over 3,000 calls to the telephone hotline in the past 18 months--although they may not all be about bullying. There is a means for people to make complaints and seek advice. I hope that the statistics now being kept will allow us to track what is happening as regards bullying.

Lord Ashley of Stoke: My Lords, I apologise for intervening again, but does my noble friend agree that it is nonsensical to claim that it is going over the top simply to ask for investigations into bullying? Will my noble friend tell the noble Lord, Lord Chalfont, that when I was campaigning on this issue in the House of Commons there was evidence and proof before courts martial: men in the British Army were found guilty of appalling conduct. There was evidence of men being tied up, stripped, having their genitals painted and being beaten and gagged. All these things are happening in the British Army, and the noble Lord says, "Don't go over the top". I did not go over the top. I simply asked the Minister to look into the whole question.

Baroness Symons of Vernham Dean: My Lords, I rather thought that the noble Lord, Lord Chalfont, considered that I was going over the top rather than my noble friend. To be fair to the noble Lord, I do not think he said that we were going over the top; he said it was "possible" to go over the top--as it is in any matter. I hope that I have made the position of Her Majesty's Government abundantly clear. The practices in initiation ceremonies to which my noble friend has alluded have been illegal in terms of Army discipline since the 1980s. It is now spelt out clearly to all Army personnel that what is expected in the Army is mutual trust and proper respect for individuals.

Noble Lords: Next Question!

Lord Chalfont: My Lords, perhaps I may--

Noble Lords: Chalfont!

Lord Chalfont: My Lords, as I heard my name mentioned a moment ago, I crave the indulgence of the House to say that I did not suggest that the noble Lord, Lord Ashley, was in any way going over the top. I know the noble Lord far too well for that. Nor was I suggesting that the noble Baroness was going over the top. She gave a good, straight Answer to a straight question. Although neither did so, it is possible to go over the top; many people do, and I wish they would stop.

Developing Countries: Tied Aid

Baroness Whitaker: asked Her Majesty's Government:
	What progress they have made towards phasing out tied aid to developing countries.

Baroness Amos: My Lords, discussions have been going on in the OECD for over two years to reach an agreement on the multilateral untying of development assistance to the least developed countries.
	Despite considerable efforts by the UK, other like-minded donors and the Secretariat of the Development Assistance Committee, I am sorry to report to the House that, yesterday, a small minority of countries continued to block progress towards an agreement. We do not accept that this should be the end of the matter, and the Government will pursue all avenues to secure an early and meaningful agreement.

Baroness Whitaker: My Lords, I thank my noble friend the Minister for that inevitably depressing Answer. Bearing in mind that an astonishing 71.6 per cent of American aid is tied to American products, so that the receiving countries cannot use their own procurement strategy or indeed local procurement, can the Minister say with more precision what can be done to hasten agreement over untying?

Baroness Amos: My Lords, given the difficulties in agreeing a text at the recent OECD meeting, it must now be a question of political will. We shall continue to use our influence. Discussions will have to be undertaken at the highest levels, including at the forthcoming G8 summit in Okinawa. I hope that like-minded countries within the OECD will also use their influence. The outcome has been extremely disappointing. The last two G7 summits, in Birmingham and Cologne, urged action to secure early agreement on untying. This failure threatens the credibility of the OECD to deliver, and also sends mixed messages to G8 members who urge liberalisation on developing countries but cannot break the link between trade and aid in their own bilateral programmes.

Lord Howell of Guildford: My Lords, is not the problem that, while several important countries are refusing to play the same game, in principle we are all broadly in favour of untying aid, although I can see that not everyone's record is perfect? However, given the determination of some countries to continue to tie aid, will the Minister reassure us that British business and British exporters will not be placed in an unfair or disadvantageous position by premature unilateral decisions by the British Government and that she will work through multilateral decisions to see that everyone plays the game together?

Baroness Amos: My Lords, I assure the noble Lord that we take this matter extremely seriously and have been at the forefront of discussions in the OECD. However, we feel that the issue needs to be taken forward by all OECD countries. It has never been the intention of this Government to undermine the position of British business.

Lord Redesdale: My Lords, can the Minister say what action DfID has taken in building capacity in the procurement area so that countries can spend their budgets wisely rather than according to the size of the bribes being offered?

Baroness Amos: My Lords, DfID has taken action with regard to its own local procurement policies. I am pleased to be able to report to the House that, in the countries where we have piloted such initiatives, since 1997-98 the amount of local procurement has increased from 5 per cent to 12 per cent. We aim also to strengthen the capacity within developing countries for competent and honest procurement. In Tanzania, for example, we have a procurement consultant who is working with the ministry of health. We have taken a similar initiative with the forestry commission in Ghana, and we shall continue to examine the question of assisting developing countries in the whole area of procurement and corruption.

Lord Tomlinson: My Lords, as well as the OECD inquiries to which she referred, is my noble friend aware that a European Commission inquiry is being held into tied aid practices in EU member states? Will she encourage the Commission to conclude that inquiry as quickly as possible, especially in relation to EU competition and internal market policies? In that respect, is my noble friend in a position to say anything about DfID procurement policies in addition to that which she has already said about the local element of procurement?

Baroness Amos: My Lords, we are aware of the European Union action. We welcome any action which the European Commission can take in securing agreement across Europe on the issue of untying aid. My noble friend may be aware that such action is being taken by the Commission following an initiative by Action Aid and some 900 European NGOs on the issue of tying bilateral aid programmes. My right honourable friend Clare Short raised the issue at the development council of the European Union. She pressed the European Commission to take a much closer interest in the matter and we have been looking to the Commission for early action. Therefore, we are very pleased that it has now decided to take that action.
	With regard to DfID's own performance, noble Lords may be pleased to hear that, in addition to the points that I made to the noble Lord, Lord Redesdale, in 1998 80 per cent of the UK bilateral aid programme was untied.

Zimbabwe: Elections

Lord Howell of Guildford: asked Her Majesty's Government:
	What consultations they have had with the United Nations authorities concerning the elections in Zimbabwe.

Baroness Scotland of Asthal: My Lords, we have been in regular contact with the UN over a period of months with regard to the elections in Zimbabwe. We are dismayed that the Government of Zimbabwe have not allowed the United Nations Development Programme to co-ordinate the activities of the various observer missions, a role that UNDP does well. However, we understand that a good degree of informal co-ordination takes place between the observer teams and we look forward to hearing the results of their endeavours.

Lord Howell of Guildford: My Lords, given the very unsatisfactory situation which the noble Baroness describes, can she tell us a little about what the Government believe will develop after the weekend? Is not the problem that, if Mugabe wins, he will have done so by thuggery, rigging, deceit and brutal murder? If the courageous MDC wins, nevertheless he will be president and there is a real danger of colossal violence. Can she tell us what the Government's policy will be next week when it will be vitally important to ensure that the whole international community moves in to support the forces of law and prevents this fine country descending still further into darkness and despair?

Baroness Scotland of Asthal: My Lords, although I endorse the concerns expressed by the noble Lord about the dire position in Zimbabwe, it is of the utmost importance that we await the outcome of the elections and also the outcome of the reports from the observers who are on the ground. They will be able to provide the best intelligence about how the elections have proceeded. It would be premature to say anything at this stage about what we plan after the elections.

Lord Marsh: My Lords--

Lord Avebury: My Lords--

Baroness Jay of Paddington: My Lords, I believe that there is plenty of time for both the noble Lords, Lord Avebury and Lord Marsh. I believe that I heard a request for the noble Lord, Lord Marsh, to speak first.

Lord Marsh: My Lords, I express gratitude to my sponsors. Can the Minister conceive of any circumstances in which the outcome of the election could be regarded as the process of a democratic free election? Does she not consider there to be a very real danger that at the end of this phoney exercise all that the observers will have been able to provide is a cloak of respectability for a ruler who does not deserve it?

Baroness Scotland of Asthal: My Lords, the most important matter is to know the outcome of the election. I do not like to speculate, but if we were to find that the opposition was successful and that, notwithstanding the appalling situation in Zimbabwe, the turnout meant that Mr Mugabe was no longer in power, very few people would say that the election should not have some cogency and be given recognition. Therefore, I believe that we must stand ready to make an accurate and clear-sighted assessment. We know the extent to which people have suffered in the interim. That will probably influence our judgment when we come to decide what to make of the elections once they are completed.

Lord Avebury: My Lords, can the Minister confirm that a consortium of local NGOs has been formed to monitor not only the elections but the observation or otherwise of freedom of expression and of assembly during the run-up period? As the international community has not been able to monitor the election satisfactorily, will the Government discuss with the United Nations the advantages of disseminating the report which will be produced by that local consortium and which will be of greater interest in view of the difficulties experienced by the United Nations?

Baroness Scotland of Asthal: My Lords, I am quite confident that all parties will want to garner as much information as possible about what has occurred on the ground during the elections. Therefore, I am relatively confident in saying that we shall look with great interest at the intelligence that has been garnered by the non-governmental organisations.

Baroness Young: My Lords, can the noble Baroness tell us whether the Government are in close discussion with other members of the Commonwealth, particularly African countries, about what might be done in the light of the outcome of this election?

Baroness Scotland of Asthal: My Lords, much vigorous debate has taken place with various members of the Commonwealth. Many members have taken an intimate interest in what is happening. As noble Lords already know, the UN has a presence there. Therefore, I can reassure the noble Baroness that we are very open to working with our partners--the Commonwealth, in particular--and they have all expressed a keen interest in what is occurring in Zimbabwe.

Lord Acton: My Lords, I have many relatives and masses of friends in Zimbabwe. Following on from the question of the noble Lord, Lord Marsh, does the Minister believe that the presence of the international observers has probably done something to reduce the violence slightly?

Baroness Scotland of Asthal: My Lords, we certainly hope so. We also hope that the presence of the international observers will give courage to the people of Zimbabwe so that they will at least attempt to register their view on how their country should properly be managed.

Baroness Park of Monmouth: President Mbeki was present at the summit in Feira, where there was a meeting on Africa. What did the Government and the other European Union powers do to persuade him to take more positive action than he has done so far, given the awful effects for South Africa as well as for Zimbabwe of the Mugabe policies?

Baroness Scotland of Asthal: My Lords, I cannot give the noble Baroness specific details, but I can reassure her that discussions about Zimbabwe have exercised the minds of all those who are aware of the election. We are very much in the forefront on that. I am sure that South Africa will be intimately interested in the outcome of the election in Zimbabwe.

Child Support, Pensions and Social Security Bill

Report received.

Lord Northbourne: moved Amendment No. 1:
	Before Clause 1, insert the following new clause--
	:TITLE3:("The basic principles")
	:TITLE3:THE DUTY TO MAINTAIN
	.--(1) The Child Support Act 1991 shall be amended as follows.
	(2) In section 1, for subsection (1) there shall be substituted--
	"(1) For the purposes of this Act, notwithstanding any other rights of the child or duties of his parents, each parent of a qualifying child is responsible for maintaining him."").

Lord Northbourne: My Lords, in Committee, I expressed concern that the narrow emphasis of the Bill and of the Child Support Act 1991 on the financial responsibilities of a non-resident parent could well be misleading, by suggesting that they were the only important obligations on a non-resident parent. In their White Paper, the Government say:
	"As explained in the Green Paper, we are convinced that one of the reasons for the failure of the existing child support arrangements is that they do not work properly with other family responsibilities".
	However, the Bill perpetuates that situation, not making the slightest reference to other responsibilities, such as nurture, love, care, guidance and education.
	In Committee, I suggested that we should use the Bill as a vehicle to define the obligations and responsibilities of the absent parent. That suggestion was rejected by the Minister. I now accept that she was right. With the help of the Library, I have done a lot of research and I now realise that the law of parental responsibility in this country is in a state of chaos compared with even such a near neighbour as Scotland. The Minister is right to say that to attempt to define parental responsibility in the Bill would be too ambitious.
	However, there remain two things that we need to do in the Bill. The first is to ensure that it is crystal clear what the word "maintenance" means in the Bill--that it means only financial maintenance, because that is what the Government want it to mean. Secondly, we should make it clear in the Bill that neither it nor the 1991 Act in any way subsumes or reduces the responsibilities of a non-resident parent, other than the financial responsibilities to the child.
	Section 1(2) of the 1991 Act absolves the absent parent of any responsibility for maintenance beyond paying over the money laid down in the Act. The Bill does not change that situation; it merely alters the basis for the calculation of the sums to be paid.
	That is why the definition of the word "maintenance" is very important. I have found no definition in the Bill or the 1991 Act. The Government want the word to mean no more than financial maintenance, but is that really what it means? If "maintenance" were to be held by the courts to mean more than financial maintenance, it could seriously prejudice a child's right to other forms of care from the absent parent. There are grounds for believing that the Government's assumption about the meaning of the word could be challenged.
	The Oxford English Dictionary gives nine meanings or usages of the word and 16 meanings for the word "maintain". These include two usages that support the interpretation of providing financial support, but there are several others that support other interpretations. They include
	"The action of giving aid, countenance or support"
	and
	"To keep up friendly relations or correspondence with".
	It would be useful to have a definition in the Bill. I have suggested one possible formulation in my Amendment No. 3.
	My other two amendments address my concern that the 1991 Act does not make it explicitly clear that the Government and Parliament intend that the financial maintenance that is dealt with in the Bill is still only one part of the totality of a non-resident parent's obligations. My Amendments Nos. 1 and 2 are suggestions for achieving that objective. They would not detract from the Government's purpose or intentions for the Bill, but they would make a point that needs to be made--a point that I believe has the support of all sides of the House. I beg to move.

Lord Higgins: The House will have listened with respect to the noble Lord, Lord Northbourne, given his experience of social security matters. He has raised some broad questions that it is appropriate to address at the beginning of our debates. There is an argument for clarifying the definition of the word "maintenance". It will be of considerable relevance when we come to debate issues such as whether the absent parent's income should be taken into account. In Committee, the Minister and I had some discussion and dispute about the position of a particular parent without care and the extent to which they--and the parent with care--were contributing, other than in financial terms.
	I shall listen with interest to what the Minister has to say about the other amendments. The noble Lord pointed out to me a few days ago that the preamble in the original Bill in 1991 was also deficient in a number of respects. Those of us who tried to work with the 1991 Act in another place over several years will feel that that is not the only deficiency in it. That is why we are now trying to improve it. This is a useful preamble to the discussions that we are going to have.

Baroness Carnegy of Lour: My Lords, I support the noble Lord, Lord Northbourne. In Committee, we had a general discussion on the noble Lord's amendment and whether or not it was a good idea to have a declaratory statement at the beginning of the Bill. I believe that Amendment No. 1 is a rather more limited declaratory statement which would be of assistance to lawyers when they are interpreting the Bill to clarify precisely what is the responsibility of both parents.
	I also feel strongly that the noble Lord is right to say that it would be helpful to define what "maintenance" means. On this subject, it is extremely easy to talk round all the figures and relate them to the word "maintenance", with different ideas in our minds as to what is meant by that. Clearly, the Government mean something different for the resident parent than for the non-resident parent in terms of finance, although they believe that it will balance the whole thing out if the Bill as it stands were to be enacted.
	I believe that this proposal is very helpful. I hope that the Minister will say something good about this, whether she accepts the amendments as they are worded or whether she agrees to bring back amendments which achieve the same end.

The Earl of Listowel: My Lords, I too support my noble friend's amendments. It should be made clear that discharging one's financial duties towards one's children is only one, and by no means all, of the duties that a parent owes a child.

Baroness Hollis of Heigham: My Lords, I know that the noble Lord, Lord Northbourne, met officials in the Lord Chancellor's Department yesterday and will be meeting the Lord Chancellor to discuss his longstanding concerns on the care of children and young people. His wider concern that fathers should have a role in the nurture of their children, whether or not they live in the family home, is of course being addressed in the Ministerial Group on the Family, chaired by my right honourable friend the Home Secretary. I have the pleasure to represent the DSS on that committee. Therefore, I am actively engaged in those discussions.
	Amendments Nos. 1, 2 and 3 seek to clarify the scope of the Child Support Act 1991 by stating on the face of the Bill that a non-resident parent's obligations to his children go beyond the obligation to maintain children financially when the parents live apart. Amendment Nos. 1 and 2 make no difference to the effect of Section 1 of the Child Support Act 1991 but have the unfortunate consequence, I am sure unintended by the noble Lord, of obscuring the clear unambiguous language of the duty to maintain there set out. Section 1(2) of the Act states:
	"For the purposes of this Act, an absent parent shall be taken to have met his responsibility to maintain any qualifying child ... by making periodical payments of maintenance ... of such amount ... as may be determined in accordance with the provisions of this Act".
	That means that maintenance is clearly defined as being about money and child support. Section 1 makes it clear that that is his responsibility. The wording of the provision,
	"For the purposes of this Act",
	makes it clear that the duties referred to are in no sense intended to override other parental duties. Amendments Nos. 1 and 2 obscure the language but do not add to it and Amendment No. 3 is unnecessary.
	There are many other Acts of Parliament which set out the responsibilities of parents. As the noble Lord will be aware, the Children Act 1989 provides generally for the responsibilities of parents, as well as providing a means of determining financial support for children. I believe that those words may lead the courts to try to put a new, different and possibly more purposive construction on the wording which would not necessarily improve the operation of the Child Support Act.
	We covered much of this ground when we had what was almost a Second Reading debate in Committee. It was accepted all round the House, and certainly on the Government Benches, that children have a right to emotional and financial support from both their parents. But this Bill, which amends the 1991 Act, focuses solely on the provision of financial support. While we share the noble Lord's desires to encourage wider parental responsibility, this Bill is not the place for such a provision. Although we absolutely support the noble Lord's concern that fathers should play an active part.
	However, within this Bill, we are developing matters in ways which will help to meet some of the noble Lord's concerns: for example, by developing the face-to-face service, which allows local interviews with parents, including fathers; by signposting, which means our staff will be trained to refer both parents on to other organisations, including welfare agencies, Relate and so on. We are working with the National Council for One Parent Families, Parentline Plus and the Department for Education and Employment to ensure that the message gets across to young people--young men in particular--about what being a parent involves and the life-time commitment which having a child entails.
	This Bill is about the child support rates which will make likely financial commitment clear to all. As I said, we shall be working across government, through the committee chaired by my right honourable friend the Home Secretary, to ensure that the wider concerns which the noble Lord has aired today are followed through. Therefore, we do not need the amendments because they will in no sense affect the wording of the Act but may cut across some of the wording in other legislation to the greater obscurity of all. With that explanation, I ask the noble Lord to withdraw his amendment.

Lord Northbourne: My Lords, I am grateful to the noble Baroness for her very full reply. I cannot deny that I am disappointed that she did not feel that she could be more positive. I do not accept that Clause 1(2) of the Child Support Act 1991 adequately defines the responsibility to maintain. It suggests one item--the paying of maintenance--which could be a part of the responsibility to maintain. There are other parts.
	It is difficult to follow exactly what the noble Baroness said and the legal implications of it as we listen in the Chamber. I shall read what she said but I by no means undertake not to come back to this matter on Third Reading. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 2 and 3 not moved.]
	Clause 1 [Maintenance calculations and terminology]:

Baroness Buscombe: had given notice of her intention to move Amendment No. 4:
	Page 2, line 28, at end insert--
	("( ) Any change in the nature and qualification of maintenance variations shall be agreed and ratified by Parliament before a change can be implemented.").

Baroness Buscombe: I shall not move this amendment but I shall move Amendment No. 26 when we reach that point.

[Amendment No. 4 not moved.]
	Schedule 1 [Substituted Part I of Schedule 1 to the Child Support Act 1991]:

Lord Higgins: moved Amendment No. 5:
	Page 98, line 15, at beginning insert ("Subject to sub-paragraph (3)").

Lord Higgins: My Lords, Amendment No. 5 is a paving amendment. We then come to Amendment No. 6 which suggests that there should be an upper limit to child maintenance of £200 per week for each qualifying child.
	We debated this at some length on 8th May in Committee. It seems to us very important indeed that there should be some limit on the extent to which the absent parent, whether it be male or female, should contribute to the provision of maintenance of each child, which we were discussing only a moment ago.
	In this Bill, we are creating something, as I understand it, which does not exist at all in law generally; namely, that the child has a right to have a share of a parent's income. While we wholeheartedly support the basic objectives of the Bill and that both the parent with care and the parent without care should have responsibility for the maintenance of the child, we believe that it is appropriate that the amount which is transferred from the absent parent to the parent with care for use in providing for the children of the relationship should take into account the extent to which the absent parent of whatever sex has income and the extent to which that income should be, as of right, the child's.
	If we do not do that, one would imagine that there is clearly a limit which the parent with care could spend on a particular child. In this amendment, we have suggested a precise figure of £200 per week for each child. Of course, that amounts to a considerable annual amount of transference of income from one parent to the other for looking after the child.
	However, it is the case that if one goes far beyond that limit--at present the sum involved is completely unlimited--what we would get to a considerable extent is a form of espousal maintenance rather than child maintenance. That gives cause for concern.
	The Select Committee in another place considered this issue. The chairman's draft of the report stated:
	"In the final analysis, the child support formula should be clearly seen to be related to the cost of bringing up children and not as a straightforward 'tax' levied on a non-resident parent. We recommend that the Government should re-examine the possibility of inserting in the legislation an upper limit on the automatic application of the revised CSA formula".
	As I understand it, in its final report the committee did not reach that conclusion. However, I think there is a great deal to be said for it; otherwise, we would see the transfer of considerable sums from one parent to the other. When one reaches a certain limit, one is bound to have doubts as to whether it would even be possible, let alone appropriate, for the parent with care to spend that particular amount on the child.
	I pointed out in Committee that the situation is even more complicated if several marriages are involved, or some marriages and different relationships between a particular individual and a series of partners, married or not. I know only too well, from my own constituency experience, that that can give rise to considerable difficulties--not least because there is often a great deal of bitterness between the first and second families. Such difficulties are sometimes exaggerated. Not infrequently, in fact nearly always, the second family finds that the main earner is earning more than he did when he was with the first family. It is rare that the reverse is true. Therefore, the second family tends to think that it should receive more, which complicates matters.
	I hope that we might have a sympathetic response from the Minister on this point. Overall, we strongly believe that it is not the task of this legislation to allocate income from one partner to the other. There is the question of whether adequate maintenance is provided--we are talking here in financial terms, not in the terms in which the noble Lord, Lord Northbourne, spoke a moment ago--and of whether it is appropriate that without limit the income of the parent without care should be redistributed to the single-parent family which exists at that stage. I hope that the Minister will respond favourably.
	There are other complications. My understanding is that if that is not so, particularly in situations where the parent without care has an extremely high income, there may be repercussions in terms of what the appropriate marital settlement will be and so forth, and whether that will affect that situation. On this occasion, I shall not go into that kind of complication, which can be considerable. The simple point is the one I have already made. I hope that your Lordships will be prepared to agree to it.

Lord Northbourne: My Lords, I support the noble Lord, Lord Higgins, and should like to comment on an interesting and important amendment which relates to the issue of what is meant by the word "maintenance". Is it money being paid over for the maintenance of the child, or for the maintenance of the spouse who is looking after the child? Does the spouse or partner who is looking after the child have any obligation to spend the money on the child? I can think of several cases which have come to me in the context of a small charitable trust with which I am involved in which a deserted mother comes and says, "Here is my child. He is in a fee-paying school and is happy there"--he may be a child who needs special education--"but I do not have enough money to pay for his education".
	One can also envisage a situation where a wealthy absent parent pays over a large sum of money. It is possible to conceive of a mother (or indeed of a father who is the resident parent) not spending it on the child. I repeat the question which I launched in connection with my own amendments: what does the word "maintenance" mean?

Earl Russell: My Lords, perhaps I may briefly restate the position of these Benches. After a good deal of discussion we arrived at the common general principle that children should be entitled to share in the increasing wealth of their parents. That means that we cannot support the noble Lord, Lord Higgins, on this amendment. However, were he to choose to press Amendment No. 8, he might receive a different answer.
	Perhaps I may raise a slight query about the statement made by the noble Lord, Lord Higgins, that there is nothing in law to say that a child is entitled to a share in the income of its parents. I know of at least one court judgment which appears to me to rest on the contrary principle. However, as I have never been able to find a lawyer willing to expound the principles of that judgment, I cannot clarify the point. Before we return to this matter, as we undoubtedly will, perhaps it would be worth while for all of us to try for a clearer understanding of the legal position than we have at present.

Baroness Carnegy of Lour: My Lords, it appears that the noble Earl's party has changed its mind on this point, or at least that the noble Earl has changed his mind.

Earl Russell: My Lords, I thank the noble Baroness for giving way. From when does she think that I have changed my mind or that my party has done so?

Baroness Carnegy of Lour: My Lords, I have not had time to read again exactly what was said by the noble Earl. However, I believe that he began his comments on this amendment by stating that the problem the noble Baroness has is that the Government are adopting a formula-based sense of justice. The more I contemplate it, the more it seems that the Government are saying, all through the Bill, that they have an idea of what a family should be; of what should happen when the family splits up and of the responsibilities of the non-resident parent. They are led to the conclusion that, as the noble Lord now says, the child is entitled to the growing wealth of both parents.

Earl Russell: My Lords, I am grateful to the noble Baroness. That principle was stated by my party before the Bill left the Commons with my prior knowledge and approval. So far as I know, it has never varied.

Baroness Carnegy of Lour: My Lords, I apologise if I misunderstood the comments of the noble Earl. The noble Earl is absolutely delighted with the Liberal Democrats and I can see the Government backing them in this respect. However, for my part--

Baroness Hollis of Heigham: My Lords, I thank the noble Baroness for giving way. I was not backing the statements of the noble Earl, Lord Russell. I was merely confirming his account of what he had already said.

Baroness Carnegy of Lour: My Lords, that is great! I believe that what the Government are doing is not at all sensible. It is extraordinary to say that if a family which has broken up is, on both sides, increasing in wealth, the child is, therefore, entitled to a transfer of wealth far beyond the maintenance of that child.
	In this regard I remember the comments of the noble Lord, Lord Stoddart, from the Labour Benches. I am sorry that he is not in his place to endorse this. The noble Lord stated that he could not contemplate that a child should necessarily be entitled to the increased wealth of its parents. I believe he also said that he felt that until he was 60 he was better able to look after his own wealth than were his children who might be his heirs. He was the voice of common sense in this matter.
	The Government have got this very wrong. I believe that once the public realise what can happen to an absent parent who has done very well and who loses much of his wealth to the spouse he has left at the expense of his new family, they will not think that this provision is sensible. However, I shall not go on because I think I have lost the attention of the Minister.

Lord Renton: My Lords, I, too, support these two amendments. Amendment No. 6 is really of great importance. Indeed, I understand that those members of the legal profession, both barristers and solicitors, who have a great deal of experience in the practice of family law have made representations to the Government about this matter without any effect.
	Quite frankly, I think that Amendment No. 6 is vital. Without it there would be a chaotic situation and it may cause serious injustice. The trouble is that the matter is presented in an over-simplified way in the Bill. It overlooks various factors; for example, a man may have two families or a man may be very prosperous but in declining health. One could enumerate the various factors.
	Under the Bill as its stands in Schedule 1, paragraph 2, where there are three or more qualifying children, 25 per cent of the net weekly income of the non-resident parent will have to be paid for the support of the children. In the case of men who are less prosperous a similar position will arise with smaller figures, but the hardship could be greater. But in the case of a man who has an income of £100,000, he will be obliged, if he has three children to maintain, to pay £25,000; that is to say, 25 per cent of his net weekly income. In some circumstances that may not be too bad, but I should have thought that it is more than is needed for the maintenance of the children in ordinary circumstances, even in a prosperous family. Therefore, it could create a very high burden.
	The amendment goes a good way in that direction but is not quite so burdensome. The amendment's suggestion of £200 a week would produce not £25,000 but a maximum of £10,400 a year per child. That is reasonable for the maintenance of the three children. If the question arises of their going to fee-paying schools that is a matter which should be dealt with separately, and I hope will be. So it seems to me that this is really one of the most important situations that arises under the Bill and I strongly support the amendment moved by my noble friend.

Baroness Hollis of Heigham: My Lords, I listened carefully to the points made by the noble Lord, Lord Higgins, and others. The noble Lord, Lord Higgins, explained the argument for a maximum level of maintenance liability with characteristic clarity and precision. I accept that the arguments on this point are finely balanced; that there are good arguments for and against setting a cap on the level of child support to be paid by wealthy parents.
	The noble Lord argued, with support from others in your Lordships' House, that child support liability should be limited to a level which meets the needs of children, and that where maintenance exceeds a certain level it inevitably becomes spousal maintenance. Our child support rates are based on the view that non-resident parents have a duty to put their children's best interests first. This means that they, like resident parents, should pay what they can reasonably afford. Our judgment is that 15 per cent of net income for one child, 20 per cent for two children and 25 per cent for three children or more is reasonable, and reflects the level of support provided by parents in intact families for their children.
	Of course, this means that children of wealthy parents will receive a higher level of child support than children of poorer parents. But that reflects the position of children living with both their parents. There is no intention that child support should provide maintenance for the parent with care, only to put children living apart from a parent in broadly the same position as they would be were they living with that parent.
	However, I accept that there are difficulties with this approach where non-resident parents have very substantial assets or, indeed, as the noble Lord, Lord Renton, said, where there may be a second family and other dependants. In such cases, the parent may derive substantial income from a wide range of sources, and, equally, a regular salary may be less likely to reflect the true income available to support the child than is the case for other parents.
	In addition, as your Lordships made clear, it is the case that financial arrangements for very wealthy families on divorce or separation can be substantially more complex than for other families--a point that has been put to us, as the noble Lord, Lord Renton, said, particularly by the family solicitors. I should emphasise here that we have no intention of forcing wealthy families to come to the CSA. Where maintenance arrangements for the children are such as to obviate the need for income support payments, parents will be free, as now, to make maintenance agreements and the courts will be able to make orders for child maintenance based on those agreements. In general, we expect these agreements to shadow the child support rates.
	However, as your Lordships will be aware, we are providing, in Clause 2 of the Bill, for either parent to have the option of coming to the CSA if court-based arrangements are unsatisfactory. But, while the courts are able to make sophisticated judgments on the level of available income, the CSA will operate a relatively simple set of rules for determining net income. This can mean that the courts could have difficulty in shadowing the CSA rates where the parents are wealthy and have complicated financial arrangements. The noble Lord, Lord Higgins, is nodding. This is a point that he also made. If either parent can unpick complex financial arrangements where there are high levels of income by coming to the CSA, it may be that in these extremely unusual and rare cases the job of the courts becomes very difficult if not impossible.
	Given that these concerns apply only to wealthy non-resident parents, I am prepared, without commitment at this stage, to consider whether setting a maximum liability at a relatively high level would assist. It may be that with a fixed limit and the ability of the parent with care to apply to the courts for a top-up--as he or she now can--the courts would find it easier to settle the other parts of the financial package. This, in turn, would mean that we were able to address many of the apparent difficulties associated with giving parents the option of using the CSA even though they have gone through the courts for their broader financial package.
	If that is helpful to your Lordships, I am willing--as I say, without commitment--to take this away. Bearing in mind the arguments that have been raised today I should obviously come back to the matter at Third Reading. That being so, it may be that the noble Lord, Lord Higgins, will withdraw his amendment.

Lord Higgins: My Lords, one knows that the Minister has herself been heavily engaged in the preparation of this particularly difficult Bill, certainly so far as concerns the Child Support Agency side, and has obviously given it considerable thought. Therefore, we welcome her response. It was perhaps a little uncertain. She began by saying "without commitment" and then later said that she would return to the matter at Third Reading.

Baroness Hollis of Heigham: My Lords, I said I hoped to come back. Perhaps I may make my position clear. I am clear in my mind--and this has been reinforced by the points made by the noble Lord, Lord Renton, today--that this matter is embedded in wider complex issues involving the courts. What I am saying to the noble Lord, Lord Higgins, is that if there is a way in which we can make the broad arrangement satisfactory, I am happy to reflect on the matter and seek to be helpful.

Lord Higgins: My Lords, over the years one has had to assess whether or not the reply by a Minister on a specific amendment is sufficiently watertight to be accepted. On this occasion the Minister has been very helpful. There is obviously a question as to the numbers involved and that is something we shall need to consider. We shall table an appropriate amendment at Third Reading but hope it is pre-empted by a satisfactory amendment from the Minister. I thank her for giving great thought to the issue. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins: moved Amendment No. 7:
	Page 100, line 14, at end insert--
	("(3) Where the shared care ceases, amendments to maintenance shall be backdated to the date of cessation of shared care.").

Lord Higgins: My Lords, Amendment No. 7 is one of the more simple amendments, certainly in relation to the wording. It suggests that, on occasion, the arrangements for maintaining the child are shared and that, in some cases, shared care ceases. It is important to be able to specify the date when that change comes into effect because, generally, it has repercussions on the financial arrangements between the parties involved.
	We feel that the appropriate moment is the date when the cessation of shared care takes place. I hope that this amendment is not controversial in the general atmosphere of goodwill generated by the Minister's previous reply. I hope therefore that she is able to accept the amendment. I beg to move.

Lord Renton: My Lords, I support my noble friend on this amendment. I hope that the Minister will welcome it. It dovetails completely with what appears to be the Government's intention as stated in the Bill.

Baroness Hollis of Heigham: My Lords, Amendment No. 7 relates to cases where the non-resident parent has a nil rate of liability because he is receiving a social security benefit and shares the care of the child.
	As noble Lords will know--we have repeated this to the level of boredom--we want to encourage parents to share the care of the child and intend to introduce provisions to support that. I shall not trouble your Lordships by going through the details again. Briefly, instead of an abatement of maintenance occurring after 104 nights of care a year, it will now kick in after 52 nights a year, thus being every other weekend and thus encouraging that support.
	That is the general principle. We are saying that non-resident parents who receive social security benefits will have a nil liability where they have any element of shared care. In the interests of the children we feel it right that in those circumstances shared care should lead to the removal of maintenance liability.
	Perhaps I can remind your Lordships that a non-resident parent on a benefit such as JSA would normally pay £5 in contribution to child maintenance which, under our scheme, would go to the parent with care. We believe that to be a reasonable abatement if he is sharing care of the child for part of the week. Where the shared care arrangement ceases and the NRP is on benefit, instead of flat rate liability becoming due from the date when the agency is notified of the change, the revised liability will be back-dated to the time that shared care ceased; in other words, it is a timing amendment.
	We want to make sure that maintenance due becomes maintenance paid. This means that maintenance levels should be stable and predictable and that we do not needlessly create maintenance debt. As now, we intend that the agency should conduct periodic case checks to ensure that the maintenance calculation is based on up-to-date information. Those case checks should happen on average every two years, although we expect the agency to check more frequently if benefit is being paid for the children and the facts of the case appear likely to change quickly.
	No change will normally be made to the maintenance calculation between case checks unless the parents report a substantial change in the facts on which the calculation is based. In those circumstances, the new maintenance calculation will normally take effect from the date when the change is reported. That means both that parents continue to be clear about how much maintenance is due and that the new liability does not carry with it substantial debt for past periods. In that way we can support our key aim of maintaining compliance with maintenance responsibilities.
	Since the effect of other changes will not normally be backdated in the new scheme, we can see no case for making special provision for changes in shared care, which is what the amendment asks us to do. Such an exception would add administrative complexity and is hardly necessary as the ending of shared care arrangements in particular would normally be reported straightaway by the parent with care. Obviously she has a financial interest in reporting the change because she would then receive the £5.
	Our view is that we have struck the right balance on shared care and, with that explanation, I hope the noble Lord will withdraw his amendment.

Lord Higgins: My Lords, it is perhaps rather typical of debates on this Bill that one tables a nice simple amendment and receives an unbelievably complicated reply.
	I gather that the Minister is not proposing to accept the amendment. That much is clear. I partially understand her reasons for not doing so, not least because, apparently, the situation is only appraised every so often rather than continuously in relation to the shared care arrangements.
	I wish to study exactly what the Minister said--as I am sure do other noble Lords--and if necessary return to the matter at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Higgins: moved Amendment No. 8:
	Page 100, line 32, at end insert--
	("(3) The regulations shall in any event provide that the net weekly income of the non-resident parent shall be reduced in the circumstances mentioned in sub-paragraph (4) and by the method mentioned in sub-paragraph (5), but subject to the limit mentioned in sub-paragraph (6).
	(4) The circumstances referred to in sub-paragraph (3) are where the parent with care has a gross annual income from all sources for the most recently completed financial year of more than £25,000.
	(5) The method referred to in sub-paragraph (3) is that for every pound by which the gross annual income of the parent with care exceeds £25,000 the net weekly income of the non-resident parent shall be reduced by one penny.
	(6) The limit referred to in sub-paragraph (3) is that the net weekly income of the non-resident parent shall not be reduced by more than 50 per cent.
	(7) The regulations shall in any event provide that net weekly income shall include both earned and unearned income.").

Lord Higgins: My Lords, Amendment No. 8 is concerned with the income of the parent with care. This is clearly an important amendment. In our view, it is unreasonable, in the circumstances described in the Bill, for the income of the parent with care not to be taken into account. It is quite possible, and perhaps not unusual, for the income of the parent with care to be significantly in excess of that of the absent parent. Therefore, in deciding how much of the absent parent's income should be allocated to the maintenance of the child, the income of the parent with care should be taken into account.
	It is absurd, if the income of the parent with care averages around £200,000, that the absent parent on a very low income should continue to pay a significant amount to the parent with care without any adjustment. We are not suggesting that he should not pay anything. But allowance should be made for the income of the parent with care.
	In the other place there was a great deal of discussion on the situation in Australia and so forth. But the argument is fairly straightforward. As your Lordships will see from Amendment No. 8, we put specific figures into the provision and suggest that the circumstances where we envisage this kind of situation developing are where the parent with care has a gross annual income from all sources for the most recently completed financial year of more than £25,000, and then we add a tapering arrangement. We are going back almost to the point of the noble Lord, Lord Northbourne, that it is a question of overall equality of the contribution made by each of the parents. We feel that that situation would not be achieved if no account at all were to be taken of the income of the parent with care, which is the situation at the moment in the Bill.
	I gather from what the noble Earl, Lord Russell, said earlier that he is of a similar view to my own and I look forward to hearing what he has to say. I beg to move.

Earl Russell: My Lords, I shall not detain the House long. We are prepared to offer our support for this amendment. We did not find the Minister's arguments against it in Committee entirely convincing. We understand the principle that care is to be set against contribution. That has not at any stage been disputed. However, where there is gross inequality of wealth, which neither the Minister nor I view with any great degree of favour, the inequality may be so great that the care is not sufficient to be set in the scale against it.
	These are the only circumstances to which the amendment as drafted were intended to apply. It is a very modest amendment. It is designed to deal with a principle which is big in theory but applies to only a small number of cases. We also think that acceptance of the principle is probably vital to consent being accorded the legislation outside, which I imagine the Minister wishes to see. If the noble Lord, Lord Higgins, wants to take the matter further, we will support him.

Baroness Gale: My Lords, this amendment argues the case that if the income of the parent with care, who in most cases will be the mother, is more than £25,000--only a small number of women would come into that category--the absent parent should pay a lower amount towards the maintenance of the child. It would be extremely unusual to have a situation in which the father earned less than the mother.
	It has been argued that surely the needs of the child must be paramount and that the child should share in the wealth of both parents. However, the child would be penalised, and it is the child about whom we should be caring, rather than the absent parent. It is said that because the mother happens to be earning a large amount, then the absent parent should pay less. That means that the absent parent would be a beneficiary and the child would lose.

Baroness Carnegy of Lour: My Lords, I think the noble Baroness has misunderstood the amendment. No doubt my noble friend will confirm that when he replies. Sub-paragraph (4) of Amendment No. 8 refers to,
	"a gross annual income from all sources".
	It therefore includes income from savings. One has to remember that quite often a mother who is the parent with care may have inherited money from her family or married somebody with just an earned income, and the family is set up in a way which reflects the mother's circumstances as a result of inheritance. Not an enormous amount of money is required to produce such an income; it could well happen.
	I believe that the Bill as it stands will result in a perception of unfairness. The concept of fairness is, of course, very important. That is because the events surrounding the break-up of a family will inevitably attract discussion. Other people will talk about them; the circumstances will be known. In my opinion, therefore, it would be a great mistake to allow the Bill to remain in its present form because, if it is seen to be very unfair, it will bring the whole measure into disrepute.

Baroness Hollis of Heigham: My Lords, Amendment No. 8 seeks to change the way the maintenance liability of a non-resident parent is calculated in cases where a parent with care has a gross annual income, from all sources, in excess of £25,000. I am not even sure whether, for example, "all sources" includes a new partner's income or whether it refers only to that parent's earnings.
	None the less, the amendment provides for the net weekly income of the non-resident parent (upon which child support liability is based) to be reduced by a penny for each pound by which the gross annual income of a parent with care exceeds £25,000, subject to there being a limit which would prevent the non-resident parent's net income being reduced by more than 50 per cent. That would lead to a consequential reduction in the amount of maintenance payable in affected cases. The amendment also provides for the calculation of a non-resident parent's net income to include income from both earned and unearned sources. I hope that the House will not support this move.
	The amendment replaces the current complex child support scheme with a radically simpler system of rates which will be easier for parents to understand. One of the main reasons for the failure of the existing scheme, and why this legislation is necessary today, is that the current scheme depends on a vast amount of information being needed to work out liability. As a result, assessments take 26 weeks to make. As a result, before he starts to pay a penny, his payments are already in arrears. As a result, an adversarial relationship develops from the start with the CSA when it seeks to collect his maintenance because he is already substantially in arrears.
	We are seeking to keep it simple. One of the key simplifications is that no account will be taken of the income of the parent with care. Our position is based on two grounds. The first is the question of principle. In that connection, I dispute the contention of the noble Baroness, Lady Carnegy, that her argument is fair and that the Government's position is unfair. Our first argument is one of principle and fairness. Our second argument is one of practicability. I shall deal with both of those points.
	I deal first with the argument of principle. We say that the parent with care already contributes in kind. Who else pays the bills for the child's food, housing, clothing, schooling and, if that is what they have chosen, holidays, toys and equipment? The parent with care pays the bills. If she is earning a gross income of £25,000 a year and is asked to pay cash as well, your Lordships would be saying that she should pay twice, first by providing care and, secondly, by an additional cash levy. Yet everyone in this House knows that a child living with a parent with care on an income of £7,000 a year will inevitably have at least a financially very different and lower standard of living--I am not referring to emotional support--than a child living with a parent with care on an income of £25,000 or £30,000 a year. As the income of the parent with care increases, so does the child's standard of living, irrespective of the contribution from the non-resident father. Therefore, to ask her not only to allow the child--

Earl Russell: My Lords, is the Minister really saying that if the parent with care earns £25,000 and the non-resident parent is £1 or so above benefit level, the care on its own is sufficient to balance that inequality?

Baroness Hollis of Heigham: My Lords, yes. I shall return to that argument. I was about to say that I believe that the father's contribution of 15 per cent, irrespective of whether he is £1 above £100--which is the correct figure, not £1 above benefit income, because up to then he pays £5, as I am sure the noble Earl knows--should be independent of what the mother brings to it. That is his responsibility as a father.
	The position of the noble Earl, Lord Russell, and perhaps of the noble Lord, Lord Higgins, is that the father's contribution, whether it be 15 per cent, 10 per cent, 14 per cent, 22 per cent, or whatever, according to the number of children, should fluctuate up or down, not according to his income but according to whether the mother's income goes up or down, according to whether or not she is in work, or indeed according to whether, though she is not in work, she happens to have snared a rich partner.
	We believe that the father's contribution should vary only according to his income and his second family, and not hers. Otherwise, it would create a gross unfairness between two fathers, both of whom may be £1 over the benefit level, in the words of the noble Earl, Lord Russell, but one of whom, whose ex-partner may have married a rich man, pays less than the other, whose ex-partner still remains on benefit. That is deeply unfair, and I hope that the noble Earl, Lord Russell, will recognise that. It is deeply unfair between fathers with the same income and the same responsibilities, but whose contribution on this formula would vary according to what the mother has done.

Earl Russell: My Lords, the Minister says that this proposal is deeply unfair. But has she heard of the principle, "To each according to his need"?

Baroness Hollis of Heigham: Yes, my Lords. But this is a case of, "From each according to his needs"--in other words, from each person according to his ability to pay. But the needs here are those of the child. The noble Earl would construct a situation where the parent with care is contributing in kind through maintenance support and in cash, especially if it has come from a husband--she does not necessarily need to have earned it. The noble Earl seems to be espousing a situation where a non-working parent with care may be getting her money and be supported by a new partner, whose income would, therefore, allow the biological father of the child to reduce his financial responsibilities to that child. Does the noble Earl really think that that is right? I do not.
	The father's obligation to his child is independent of what the parent with care may be doing--whether she is on benefit, married, in work or not in work. His should be an ongoing commitment that reflects his income and his responsibilities, not hers. She is already contributing to the well-being of the child through her support in kind.
	The first argument is one of fairness. Noble Lords opposite wish to make the parent with care pay twice over, especially if she is fortunate enough to have married a wealthy man. The second argument is one of practicality. It is hard to imagine that there will be many parents with care with incomes of £25,000 within the CSA system. As far as we know, the number is about 200 out of a caseload of 1.2 million. In order for the CSA formula to work, all we take into account at present is the income of the fathers, because we are saying that the parent with care is contributing in kind through her support of the child. So the agency is making 1.2 million assessments of the income of the fathers--the non-resident parents.
	If we were to accept the amendment, we would have to double the number of those assessments because we would need to assess the income of the parent with care. Therefore, instead of 1.2 million assessments, we would be assessing 2.4 million incomes. But what about the situation as regards the stepchildren in the second family? If there are stepchildren in the second family--who, in all decency, we are treating in exactly the same way as the biological children of the non-resident parent--we then have to look at the capacity of the non-resident parent's new partner to support the stepchildren. Well, half of them have remarried and one-quarter of them have stepchildren, so not only would we have 2.4 million examinations of income; we would also have something like 3 million examinations of income to consider.
	Equally, the parent with care may have more children in her new relationship. So we would have to offset that against this whole formula in the same way as we are doing for the non-resident parent. This means that we would then have to look at her partner's new income and thus would have carry out up to 3.5 million, perhaps 4 million, assessments of income, instead of 1.2 million assessments, just to pick up 200 parents with care. Instead of making an assessment of one person--namely, the non-resident parent--based on his earnings in a simple ready-reckoner form, we would, under the amendment, have to assess not only that income but also her income, his new partner's income and, possibly, the income of the parent with care's new partner just to catch the income of 200 parents. Moreover, as a result of having done so, the abatement in his formula--the payment that he makes--is likely to be trivial.
	We would have to assess 4 million people in order to catch 200 parents. As a result, judging from what we know of those parents' income, the total effect on the non-resident parent's payments would be trivial. Perhaps I may give your Lordships an example. The woman earns £28,000 a year. Very few non-resident parents with care have earnings of £28,000 a year. He earns £15,000 gross--that is, about £10,000 to £12,000 net and has one child. Under the Government's scheme, he would be paying £38 a week, but under the formula proposed that would be abated by just £5 a week. However, another father on similar income and living in similar circumstances with the parent with care on an income of £20,000, rather than £28,000, would pay £38 a week.
	So we would have assessed the income of 3.5 million or perhaps 4 million people to pick up 200 incomes of parents with care. As a result, we would have to spend another £10 million on technology and there would probably be several weeks of delay and complexity because of possible arrears or possible errors. At the end of the process, we would get just a trivial reduction in the maintenance that the non-resident parent would pay. It is neither practicable nor fair. Therefore, if the noble Lord wishes to test the opinion of the House, I hope that noble Lords will not support these amendments.

Baroness Carnegy of Lour: My Lords, has it occurred to the Minister that a very rapid increase may develop in the prosperity of women as against men in earnings, as well as in income from savings? This whole argument is based on a certain formula and on the Treasury's fear of the complication of the exercise. I am concerned about fairness for individuals. People matter. Does the noble Baroness realise that the situation may change and that those figures may not remain relevant?

Baroness Hollis of Heigham: My Lords, I do not want to be discourteous to the noble Baroness, but this is the Report stage. We had a very full debate on the issue in Committee. I am trying to keep my remarks tight because there are many amendments to deal with tonight. I very much hope that the noble Baroness is right; indeed, I expect it to be the case that women's prosperity will grow. But any woman who is not on benefit does not need to contact the CSA. I hope that the noble Baroness understands that. As far as we are concerned, women who are not on benefit are private cases and do not need to approach the CSA. The more women's prosperity grows, the less likely they are to turn to the CSA. Therefore, the issue raised by the noble Baroness simply does not apply.

Lord Higgins: My Lords, I listened with great care to the comments made by the Minister. What the Government now propose is a very major simplification. But throughout this matter, which goes back to 1991, it has been a question of balancing simplicity against fairness. The same is true as regards our tax system: we have developed a tax system that has become increasingly complicated in order to achieve a greater degree of fairness. However, the point made by my noble friend Lady Carnegy--namely, that what is important here is the perception of whether it is fair--is also of some significance. Great difficulty will be experienced in getting people to accept that it is fair to take into account the income of the absent parent only and not that of the parent with care.
	There has, I believe, been some difficulty in making contact--if I may put it that way--on part of the argument, which was also true of the Committee stage. At the beginning of her remarks, the Minister said that the parent with care is the one who is paying the bills. Yes, that is true. But the question is: who is providing the money to pay those bills? In this case, it is, generally speaking and to a significant degree, the absent parent--

Baroness Hollis of Heigham: No, my Lords. I am sorry--I am breaking my own conventions here--but what the noble Lord says is not true. The average contribution of a man in full-time employment will be £31 per week under our scheme. Perhaps I may tease your Lordships and say that only a bloke could think that you can bring up a child and pay for clothes, food, housing, heating, utilities, cleaning, toys, holidays and school expenses on £31 a week.

Lord Higgins: My Lords, those parents are quite clearly making a contribution. But, given their relative circumstances, the question is whether it is an appropriate contribution for one to make as against the other. We accept that there is a relatively small number of parents with care in these circumstances, but we are saying that it is appropriate to take into account both sets of income, even though that may involve a greater degree of complexity. The Minister referred to adversarial relationships. Our amendment would not increase the degree of an adversarial situation between the CSA and the absent parent. The latter will obviously feel that it is fairer if the income of the parent with care is taken into account.
	It is also true to say that the parent with care with an income over the levels we have specified may feel that that results in a degree of conflict between her and the CSA. We are not asking the CSA to assess anything extraordinarily difficult--certainly not at these levels of income where, presumably, the figures are already prepared by the individual concerned for other purposes.
	I have listened with great care to what the Minister said. However, I feel that this is a matter on which we should test the opinion of the House, given the arguments which have been put forward on both sides.

On Question, Whether the said amendment (No. 8) shall be agreed to?
	Their Lordships divided: Contents, 94; Not-Contents, 124.

Resolved in the negative, and amendment disagreed to accordingly.
	[Amendment No. 9 not moved.]
	Clause 2 [Applications under section 4 of the Child Support Act 1991]:

Baroness Buscombe: moved Amendment No. 10:
	Page 2, line 41, leave out subsection (2).

Baroness Buscombe: My Lords, in moving Amendment No. 10, I shall speak also to Amendments Nos. 11 to 20.
	Perhaps I may begin by reaffirming that our overriding interest--which I believe is shared by all Members of the House--is the welfare of children. With that priority in mind, we are very concerned to see significant improvements in the CSA. We listened with care to what the Minister had to say in Committee and, notwithstanding her very clear and full reply, we have felt it nevertheless necessary to revisit the issues at Report stage. It is necessary because we believe that the provisions in Clause 2 will have an enormous impact upon the system--an impact that will not necessarily improve the CSA.
	The provisions in the Bill as currently drafted mean that any party, whether or not on benefit, in receipt of a court order after the commencement of the Act will be able to approach the Child Support Agency to have their child maintenance reassessed after 14 months. This may and will cause many problems.
	It will see the end of clean-break settlements between husband and wife which provide certainty to both parties and, vitally, to the children of the relationship. It will tie the hands of the courts, which will be forced to assume child maintenance in line with the CSA's formula, even when it is totally inappropriate and unjust to do so. It will make the negotiation of a package of measures almost impossible, as each party will refuse to agree terms knowing that this sword of Damocles will be hanging over their heads with the potential to undermine completely an agreement made in or out of court. It will result in a more confrontational process, with the risk of domestic violence.
	The Bill will limit the ability to achieve resolution through mediation, or orders by consent through the new ancillary relief scheme. It will also increase spending on legal aid. It will skew maintenance agreements, with the non-resident parent likely to want to pay spousal maintenance purely as a bargaining mechanism, to be traded off against an increase in child maintenance brought about by a referral to the CSA. It will increase the use of sales and charge back and other arrangements relating to the family home, which will be detrimental to children and ex-wives.
	The provision runs counter to the fundamental principles of mediation and negotiation that have guided family law reform for more than a generation--principles that complement the general direction of European law and practice.
	How do we respond? It is widely felt that, at present, the jurisdiction of non-benefit cases, including top-up, should remain with the courts. Parties must be able to make their own binding agreements. Subsequent referral to the CSA, as now, should be possible only if one of the parties claims benefit or if the parent with care wishes to use the powers of the agency to enforce collection. In the latter case, the agency should be able to collect the maintenance level agreed by the court.
	Our amendments seek to respond to these proposals. In our efforts to allay some of the concerns I have raised, I should like to draw the Minister's attention to Amendment No. 15, which was tabled only a few days ago prior to Report stage. It is a probing amendment designed to gain clarification of the Minister's statement in Committee on 8th May regarding the provisions in Clause 2, which are recorded in Hansard at cols. 1301 to 1309. The Minister indicated that,
	"Very simply, no private cases need ever come to the CSA...Only those cases where the parent with care is on a prescribed benefit--normally, income support--would come to the CSA".--[Official Report, 8/5/00; col. 1305.]
	Amendment No. 15 is designed to confirm that cases in these circumstances will be accepted by the CSA, as well as cases where maintenance payments are not being paid reliably and the parent with care wishes to approach the CSA.
	If cases need only come before the CSA 12 months after a court order is made where the parent with care goes on to a prescribed benefit, couples who agree financial arrangements that are subsequently converted into court orders will continue to be able to do so in the future. The courts will be able to regulate and vary where necessary the maintenance agreement over the following years.
	Parents will also have a wide ability to make agreements between themselves. They could, for example, trade off capital or spousal maintenance in return for differing levels of maintenance for the children. The freedom to do this would be lost if either party were able to renege on an agreement by approaching the CSA after 12 months in the belief that they could better an agreement that was fairly made between them previously. Neither party would be prepared to make concessions or a trade off if they thought it could be overridden in a year's time by the CSA, which would make a completely fresh assessment and completely ignore the concession or trade-off which was made 12 months previously.
	Clause 2 would also undermine government policy on family matters--which is, wherever possible, that parents should be encouraged to enter into mediation and discussions in order to settle spousal maintenance. There are circumstances where parents may wish to make agreements without involvement from the CSA, and these could include the following.
	First, the parents could agree that the payments for the children will be greater than the CSA would assess. The most common reason for this is likely to be in return for a trade-off--for example, the mother will agree to make no maintenance claims for herself (known as a clean break) in return for a better level of maintenance for the children. This can have benefits all round. The non-resident parent is happier to pay the money because it is deemed to be going to the children, and it gives a definite length to the maintenance obligation. In turn, the mother no longer has to concern herself about forming new relationships and the effect that that could have on the maintenance.
	Secondly, parents could agree to a lesser sum than the CSA would assess. Again, this will often be as a result of financial trade-off. For example, the non-resident parent may transfer capital or the house to enable the mother and child to remain housed, with the mother accepting a lesser level of maintenance for the children in return. The scope for this kind of settlement is likely to increase under the new CSA where the resident parent's income is no longer taken into account. One could have situations where the resident parent works and has sufficient income, but there is a need for capital to secure accommodation for the children.
	To benefit from these exemptions the parents need to have their agreements approved by the courts. This provides an important protection against a parent being pressurised into unsuitable agreements, while, at the same time, providing a straightforward and established procedure. It is a procedure that is frequently used when divorcing parents have been able to reach agreement on general financial aspects, because it enables them to ask the courts to confirm the terms of an overall settlement that may well include spousal maintenance and capital at the same time as child maintenance.
	The effect of allowing the CSA to consider cases that were decided in the courts 12 months previously would mean that either parent could call upon the state to intervene and override an agreement that they had reached, even if that agreement had been reached after full advice and after a court had approved the terms. On the other hand, one can see many benefits in allowing the current situation to continue, which enables separating parents to agree their own financial arrangements, subject to the protection of court approval, which will ensure that those arrangements are both reasonable and realistic.
	Finally, I should like to turn in particular to Amendment No. 20, where the court is to consider a variation. Briefly, the new arrangements will allow a court order to be assessed after it has been in force for 12 months, although the assessment will in fact take place after 14 months--12 months plus two months' notice. At present, this assessment cannot take place, but a court can vary an existing order. Under the new arrangements, it will not be possible to apply for a variation, even if both parents wish so to do. If they can agree, they will have to go through the rigmarole of discharging the old order and making a new one, which is all grist to the lawyers' mill. If they cannot agree, they will be forced to go to the CSA. I beg to move.

Lord Goodhart: My Lords, I rise to support what has been said by the noble Baroness, Lady Buscombe. We have always held the position that the child support system is basically crude and formulaic. It is far less effective in reaching fair and balanced arrangements than maintenance orders made by the court on the basis of the facts of the individual case or, even better, agreements reached between the parties and approved by the court.
	The only advantage offered by the child support system is its cheapness, although even that seems to be a matter of considerable doubt. Our view, therefore, is that it is both wrong and counter-productive, where it is possible for orders to be made by the court or by agreement between the parties, for the result which will have been worked out based on the individual circumstances to be capable of being overridden on application to the CSA by whichever party feels that they would do better out of it, thus applying this very crude child support formula. For that reason, we feel that these amendments are plainly a move in the right direction and we support them.

Baroness Hollis of Heigham: My Lords, this group of amendments, so clearly and ably spoken to by the noble Baroness, Lady Buscombe, concerns the relationship between the courts and the CSA and their relative jurisdictions in the context of child maintenance. It is important that the reforms we are proposing provide a service for all parents and children who need to settle child maintenance issues. The new relationship between the CSA and the courts provided by Clause 2 ensures that this will be a reality.
	The simple and predictable rates of child support liability will help parents, regardless of whether they are on benefit, earning modest wages or are extremely wealthy. We are determined to ensure that there is no "two-tier" child maintenance system--namely, one for the rich and one for the poor--in which wealthy non-resident parents would be able to impose child maintenance arrangements that would not be in the interests of their children and would take no account of the child support rates.
	Too often in the past--this is the precise reason why the party opposite established the CSA under the 1991 Act, with our support--that is exactly what happened in the courts. Inconsistent and unpredictable rates of child maintenance were imposed. There was an increasing trend for "clean-break" settlements where regular maintenance payments were traded for property or capital transfers. But the central point of our position is that non-resident parents cannot make a "clean break" from their children.
	We accept entirely that there are conflicting principles in this area, but the result of those arrangements was that, too often, non-resident parents were able to avoid any ongoing responsibility for their children because once they had made over capital in the form of the matrimonial home, the taxpayer then had to pick up the benefit bill. It is for this reason that we propose to change the system.
	Provisions in the Child Support Act 1991--which, as I have said, we supported--established an administrative mechanism for setting levels of child maintenance and, where required, for collecting maintenance payments on behalf of the children concerned. When the previous government introduced that Act, they clearly envisaged a time when all child support matters would be settled by the agency; that is, the agency would oversee all child support decisions and impose that figure on the courts. However, it quickly became clear to the Conservatives that the CSA was struggling to keep up with its caseload. As a result, in 1995 the then government deferred indefinitely the take-on of court cases, but the long-term aim was still that the CSA should eventually take away from the courts all jurisdiction for child maintenance matters.
	Whether we should return to that principle--namely, that the CSA could present a fait accompli to the courts--was something that was raised during the consultation process on the child support Green Paper. Some respondents feared that this would create one law for the rich and another for the poor. Furthermore, we had our own concerns. While it is right that, in cases where arrangements for supporting the children do not involve the taxpayer--so-called "private" cases--the parents should be able to choose whether to apply for child support, equally, we could not allow parents with care on income support to regard child support as voluntary; otherwise the taxpayer would be supporting reluctant and irresponsible fathers. But--this is the key point here--every year at least 10 per cent of private cases move on to benefit and something of that percentage on benefit become private cases. It is clear that it is impossible to run parallel jurisdictions.
	There is a great deal of movement in this area. Given our proposal that low earners--those on working families' tax credit--will in future be private cases, we must anticipate that during each summer holiday, some of those parents will need to move back on to income support because they cannot sustain their jobs. As a result, we are likely to see the movement between private and benefit cases increase rather than decrease. That would mean that in many cases--although obviously it will be less likely as regards the low paid--maintenance arranged by the courts would have to be overturned by the CSA as benefit became payable for the children.
	We also listened carefully to the views of lawyers, judges and others who wanted court jurisdiction in this area to remain as now. Some wanted more powers to be given to the courts. Many others wanted the courts to operate the child support rates, but to have the discretion to move away from them. In the end, we came to the conclusion that giving back to the courts some of the jurisdiction that they had lost, or alternatively the total removal of court jurisdiction (imposing a flat-rate CSA system on them), would be unsatisfactory as regards what we are seeking to do.
	Following the original Conservative line and removing all power to set child maintenance from the courts would deny parents the right to agree to depart from the child support rate if that is in the children's best interests (where benefit is not involved) and to have the agreement converted to a court order, perhaps along with other financial arrangements. Parents could well propose to pay above or below the figure, for example, in order to meet school fees and so forth, which would be in everyone's best interests. Alternatively, they may wish to accept other financial responsibilities in lieu. If such arrangements can be agreed amicably so that neither side feels, so to speak, hard done by, that would, of course, be a proper way forward and the state would have no interest at stake as regards the taxpayer. We did not want to undermine the capacity of parents to come to a different arrangement where consent for that different arrangement remains in place because both sides see it as in the best interests of the children. That is why we are not seeking to impose CSA rates a priori directly on to the courts.
	However, while consent remains, either parent will be able to apply to the CSA to calculate and collect child maintenance if court-based arrangements prove to be unsatisfactory. They can return to the CSA and accept instead the CSA-calculated formula. Crucially, Clause 2 will not apply to existing court orders and use of the CSA's child maintenance service by such parents will not be available until after a new court order has been in place for at least a year. Parents who wish to transfer to child support will have to give at least two months' notice. Picking up the point identified by the noble Baroness, Lady Buscombe, we want to allow parents and their lawyers time to mediate and renegotiate new voluntary agreements which are satisfactory to all involved.
	The trigger might be that one partner or the other has new family arrangements and as a result agreements are no longer satisfactory. They may want to return to the CSA being unable to resolve the matter by mediation. Knowing that either party can go to the CSA, the additional two months' grace might allow them to go to mediation and not involve the CSA. That is the point of the provision.
	We believe that it is a sensible proposal which will encourage parents, lawyers and the courts to come to child maintenance arrangements in the shadow of the CSA. All parties will know that either parent, having been to court, can turn to the CSA in future and that it would therefore be sensible to determine child maintenance broadly in line with the simple and predictable child support rates.
	In response to the noble Baroness, Lady Buscombe, perhaps I may ask what the lawyers would advise their clients to do in such a case. The lawyer of a non-resident father would say to him, "Don't go below the CSA rate and reduce your property or spousal maintenance because if she becomes greedy"--and I use that word advisedly--"she will up the child maintenance by going to the CSA". He will advise the father not to go below the CSA rate because if he does the settlement may be revisited. What will the mother's lawyer say to her, the parent with care? He will say, "Don't go for more than the CSA rate and reduce your spousal maintenance or property accordingly because if he becomes greedy he will go back to the CSA".
	So what have we done? Instead of arguing between the two of them about child maintenance, it will become "forgiven" because both lawyers will know that, unless they can be absolutely confident that their clients will continue to agree into the far distant future, they protect their clients' best interest by adopting the CSA rates and debating all the other elements; for example, the property, the pension, spousal maintenance, the savings, the PEPs and the TESSAs. They will depart from the child support arrangement only when both parties agree and when both lawyers are confident that they will remain in agreement. The result will not be more conflict, as the noble Baroness, Lady Buscombe, suggested, but less. There will be more mediation rather than less; more negotiation rather than less.
	In Committee, I said that we were trying to set up a Mexican stand-off. Yesterday, I was talking to some senior family lawyers who gave--I was going to say "support", but that might be too strong; they accepted the basis for the provision and made it clear to us that with certain conditions they could make it work. They said to me, "You said that you were setting up a Mexican stand-off. We have decided that you are setting up a Mexican wave!" I thought that was rather nice and I agreed entirely. All parties will agree a common basis.
	Clause 2 will ensure that a two-tier system between the courts and the CSA will not develop. It will encourage courts in the future to make consent orders in the shadow of our rates because after a year either parent will have the option of turning to the CSA. I am sure that as a result their lawyers will agree to stick with it. Amendments Nos. 10 to 14 would take us back to the past and therefore I hope that the noble Baroness will accept our arguments.
	The noble Baroness went on to explain Amendment No. 15. It appears to be designed to remove a non-resident parent's ability to apply for a child support calculation if there is a court order, made after the reforms are introduced, in force. Parents with care would still be able to apply to the CSA, but only where the non-resident parent was not complying with the court order in terms of regular, reliable maintenance. It cannot be right to give access to child support solely to a parent with care; and why should she be prevented from seeking a child support calculation when the non-resident parent continues to make payments under a court order which she now thinks is unfair?
	However, I should like some elucidation from the noble Baroness. Is she suggesting that the CSA must collect whatever formula the courts have determined for child support? If that is what she is proposing--and I believe that it is--every person who comes to the CSA from a court settlement will have applied to him or her, not the CSA rate, but an individually determined CSA figure which the CSA will have to chase. Arrears must be calculated, as must any other considerations which come into play; for instance, another child. I believe the noble Baroness is saying that for a raft of cases manual transactions must be done. Whereas everyone else will receive 15, 20 or 25 per cent, this person will receive 8 per cent, this person 10 per cent, this person 16¼ per cent and that person 18¾ per cent, according to whatever the courts have decided. The staff of the CSA would have to chase those percentages on the basis of an income which may continue to change because of the court agreement. That would totally undermine the simplicity of the CSA in collecting its rate; the 15, 20 or 25 per cent.
	The amendment seeks to limit the role of the CSA to a collection agency, including collecting amounts which we do not believe are adequate and which the parent with care may not believe to be adequate, resulting perhaps in unreliable payment.

Baroness Buscombe: My Lords, I thank the Minister for giving way. My understanding of the amendment is that if the parent with care is dissatisfied with the court arrangements because payments are not being reliably made, he or she can have the option of going to the CSA to have the court order overturned. That is the meaning behind Amendment No. 15.

Baroness Hollis of Heigham: My Lords, is the noble Baroness saying that the court order would be overturned and the CSA order would replace it?

Baroness Buscombe: My Lords, yes.

Baroness Hollis of Heigham: My Lords, it would also mean that no matter how inadequate the level of maintenance, the parent with care would always be prevented from applying to the CSA if the non-resident parent paid up. The noble Baroness appears to be saying that if the non-resident parent paid maintenance, but at a level which the parent with care later thought was inadequate, the latter would have no right to go to the CSA. It is precisely in such cases, where the maintenance is inadequate because it is low, where the non-resident parent is most likely to be paying in full.
	Given all of that--we are getting into further complexities and I do not want to rely too heavily on them--the amendment is defective. It achieves the opposite effect. It prevents parents with care, with a court order with which the non-resident parent is not complying, applying for child support. Even if the noble Baroness's arguments were persuasive, the amendment does not achieve that result.
	Amendment No. 16 seeks to change the 12-month waiting period to six months instead. We know that new court orders for child maintenance can be made only where the parents have previously consented to a written maintenance agreement. With that in mind, we have decided that any new "consent" order should be in place for at least 12 months to give it time to bed in. We believe that six months, which the amendment proposes, is too short. We do not want to encourage a knee-jerk reaction; we want time for reflection and mediation and not possibly vindictive behaviour. We want fairness between the parties in that if one party can go to the CSA, so can the other.
	Amendment No. 17 seeks to address a particular problem which was a feature of court-based maintenance in the past; the risk that parents with care were forced to accept lower maintenance under duress, causing the children to lose out. But the CSA would be placed in an impossible position in trying to decide whether a court order, perhaps made several years previously, should fall within this provision. The CSA would inevitably have to take the parent with care's word for it, leading to endless litigation. I really do not think that we should go down that path.
	Amendments Nos. 18 and 19 would, if enacted, give back to the courts the power to set levels of child maintenance in any case where they were making other financial arrangements, such as a property settlement or an order for spousal maintenance. These amendments give the courts an increased jurisdiction by allowing county courts to change a court order where an application for financial relief, such as spousal maintenance, is already before them. This means that both the courts and the CSA could potentially be involved in assessing child maintenance for the same child. That form of parallel jurisdiction is confusing, unhelpful and, we believe, not in the best interests of the child.
	All of these amendments fly in the face of our plans to reform the child support scheme. We have moved a long way from the starting point of the Conservative government, which was that the CSA figures should apply to all arrangements, including those of the court, without any discretion at all. We have listened to the lawyers and Members opposite. As a result, we have decided that where the parties agree they need never come to the CSA. The CSA is there as a fallback. Both lawyers know that if either party is unhappy he or she can return to the CSA. Therefore, each lawyer knows that it is not in his client's interests to seek to exploit the other--whichever way it goes--on the issue of child maintenance because ultimately the aggrieved party can have recourse to the CSA. Therefore, that issue will no longer be subject to conflict and the whole debate will be on the other elements.
	Finally, the noble Baroness addressed at some length Amendment No. 20 which seeks to ensure that the courts retain the power to vary new court orders which are made after the reforms have been introduced and have been in place for at least a year. As drafted the amendment does not achieve that aim. However, having listened to the arguments of the noble Baroness, I understand the case for such a provision. If it was clear that any order which had been in place for at least a year and then varied would not preclude either parent at any time from applying to the CSA for a child support calculation because of dissatisfaction with the varied order, I would not be unsympathetic to tabling a government amendment to achieve that at Third Reading. We have talked to family lawyers about it and listened to the noble Baroness today. I should like to be helpful because I believe that the noble Baroness has put forward some good arguments. If the rest of the package gains the approval of the House at Third Reading, the Government will table an amendment to that effect. Given what we have said, it would make the scheme work better. Of course, if we ended up with a different scheme I would not be so helpful.
	The protection of children is at the heart of our child support scheme. We believe it is right that maintenance proposals should be as simple as possible and that parents should have discretion to make alternative arrangements as private cases if they wish. If those arrangements come unstuck, they can turn to the CSA. Because they have recourse to the CSA those arrangements are less likely to come unstuck. Therefore, we hope that child maintenance will become less adversarial and flow more regularly, which is in the best interests of the child. With that, I hope that the noble Baroness will withdraw her amendment.

Baroness Buscombe: My Lords, I thank the Minister for her very full response to my plea in relation to these amendments. We have had a full debate. The Minister has been made aware of the concerns in your Lordships' House, in another place and among a number of different organisations. We understand the intention of the Government to improve the CSA and its working. However, I am still unable to understand how that will assist with caseload. The caseload has been one of the reasons for the problems with the CSA in terms of breakdowns, delays and lack of communication. The noble Baroness called it "the Mexican wave"; I call it "forced mediation", but I take her point, sexist though it sounded.
	As to the two-month period, that is for mediation and the proverbial wet towel on the head. I hope that in practice that will be enough time for the parties to reconsider any disagreement or breakdown in the court arrangements. I am grateful to the noble Lord, Lord Goodhart, for his support for these amendments. There is no question but that most of the arrangements executed by the courts are good, effective, and stem from the involvement of people of experience and expertise who are very flexible in their approach.
	I also thank the Minister for her response to Amendment No. 15. I apologise for my suggested confusion in that case. The effect of the amendment is that, in private cases where the parties are not on benefit, they will be able to reach an agreement and have that incorporated in a court order. That agreement will remain binding unless the receiving party goes on benefit or the paying party does not make the payments in a reliable way, in which case the court order can be overturned by the CSA. I accept the other points made by the Minister which I shall read with care in Hansard.
	Finally, I thank the Minister for her response to Amendment No. 20. I understand that, as currently drafted, it is not acceptable to the Government. Nevertheless, I thank the Minister for her positive response and look forward to the proposed amendment to be tabled at Third Reading. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 11 to 20 not moved.]
	Clause 3 [Applications by persons claiming or receiving benefit]:

Baroness Buscombe: moved Amendment No. 21:
	Page 3, line 12, leave out ("may") and insert ("shall").

Baroness Buscombe: My Lords, in moving Amendment No. 21, I should like to speak also to Amendments Nos. 22 to 24. These are probing amendments. I begin by confirming our support for the Government's proposals in Clause 3. The purpose of the amendments is to extend further the provisions in the clause by providing that the Secretary of State should not be constrained or controlled as currently proposed. With regard to applications by those who claim or receive benefit, the proposed new Section 6(5) provides that,
	"The Secretary of State may not act under subsection (3) if the parent asks him not to".
	In tabling these amendments we seek to highlight a difficult area; namely, those cases in which there is a history of violence. On the face of it, these amendments may be surprising. It may appear to make sense that, as currently drafted, the Bill should not exert any pressure on a claimant to produce information where that may hurt a former partner. But we believe that it is important for an aggrieved parent to be secure in the knowledge that a non-resident parent, who may be overbearing and aggressive, cannot benefit by physical intimidation or unpleasant or unreasonable behaviour and so, by persuasion, prevent the agency from gathering the necessary information. I beg to move.

Baroness Hollis of Heigham: My Lords, at the beginning of this process we faced a basic dilemma. We did not at any stage want to endanger the safety or mental or emotional health of women and children. Clearly, we could have gone down one of two paths. One was to say that good cause should be extended. As to that, our fear was that as a result maintenance could be a voluntary payment. Alternatively, to a degree we could have followed the path described by the noble Baroness and tightened up the procedures dramatically so that no non-resident parent who was abusive, emotionally or physically, could be rewarded for that bad behaviour by being able to apply duress to the parent with care. We were tempted by that second path. The reason we did not go down it was that we thought that it would, understandably, be misunderstood in today's climate. It might be thought that we were not being sufficiently protective of women at risk. There was a real and difficult debate as to what behavioural consequences there would be.
	As a result we tightened up the administrative procedures. Instead of the parent with care having to opt into the collection of child maintenance--to begin with we had only a 30 per cent co-operation rate--we established a system where she had to opt out, and with a tighter timetable. Already that, together with our other changes in procedure, is establishing greater compliance.
	Under the scheme a lone parent who claims income support or income-based JSA must make an application for child maintenance but is not required to do so if there is good cause: that there is risk to her or any child living with her suffering harm or undue stress as a result.
	The changes to be introduced in the new scheme will mean that parents with care who make a claim for income support or income-based JSA will be treated as having applied for child support unless they specifically request that child support should not be pursued.
	We then have the definition of "good cause". We are doing that not only to speed up procedures but because we do not want to increase the risk of parents with care having to be seen to seek child support which might give signals to an abusive partner that he can bully her out of so doing. Our new approach makes it clear that child support action is linked to the benefit claim and that it is not a separate process for which the parent with care must apply. We think that that process will be not only more streamlined but safer for her because it leaves her less vulnerable to harassment and bullying. We are sending a clear signal to the parent with care and the non-resident parent that maintenance is not an optional extra. They must pay unless there is good cause or good reason why they cannot.
	Amendment No. 21 seeks to toughen up the good cause provisions by removing the Secretary of State's powers not to treat the benefit claim as an application to child support in certain circumstances. This amendment would have the effect of delaying the process of deciding whether or not to take child support by not allowing the CSA to make the judgment that the parent with care is clearly at risk. As well as causing unnecessary distress to vulnerable parents with care, this amendment does not help children.
	Amendment No. 22 similarly requires that the Secretary of State will act to recover child maintenance unless the parent with care asks him not to do so. This has the effect of placing more onus on the parent with care to opt out of claiming child support. We believe that it is important that we should not pursue maintenance at the outset if we know that the parent with care would then be at risk.
	It would be wrong to assume that all parents with care who do not opt out will want to claim child support. In some circumstances the parent with care may be in emotional turmoil or under threat and unable to take the necessary action to opt out. Amendment No. 22 would have the effect of forcing the Secretary of State to recover child maintenance in these cases where she did not opt out and would put pressure on the parent with care to have to opt out in what may be difficult circumstances.
	I am aware that the noble Baroness is concerned that we might not be doing enough to discourage fraud; or that we might encourage aggressive behaviour against the parent with care. In the usual Ministers' phrase, we think that we have got the balance about right.
	We are satisfied that the policy has already gone a long way to discourage fraud and collusion and to encourage parents with care to co-operate with the CSA. About 85 per cent of parents with care choose now to apply for child support which compares with only 30 per cent a few years ago. But there will always be a small minority of parents who do not want to co-operate with the CSA--for example, women who have done an informal deal with their ex-partner so that he gives cash but pays less than if he had been assessed by the CSA. To some extent the previous system encouraged this. By having the maintenance disregard, and so on, we hope that we have a system which builds out that type of fraud and collusion.
	On top of that, the new scheme will mean that the CSA provides a more streamlined service better able to meet customers' needs. As a result, we hope that a parent with care who has maintenance collected through the CSA will benefit from being able to use the CSA and will receive the money to which she is entitled.
	Amendment No. 23 requires the parent with care to opt out within 14 days of being notified of her right to do so. This amendment has the effect of adding a further 14 days to the initial stage. Setting a formal time-scale of 14 days to respond will build unnecessary delays into the process. In the new scheme, benefit claims are treated as a claim for child support unless the parent with care decides to opt out. This provides the Secretary of State with the power to start the recovery of child maintenance as soon as it is feasibly possible.
	Normally when a parent with care makes a claim for benefit, an interview will take place. If she is happy to receive child maintenance, her claim will be processed straightaway. If the parent with care wants to opt out, she may give her reasons immediately and, if they are accepted, the case will be closed and reviewed at a later date. So in many cases child maintenance can be processed immediately.
	However, there may be times when the parent with care may be unsure about claiming child support and may want extra time to consider her options. We want this discretion and flexibility to continue in the new scheme. We think that a period of two weeks is normally sufficient. But we would not want a statutory waiting period to be built into every case, in particular where the parent with care has already made up her mind and given her reasons; nor do we want to prescribe on the face of the Bill how long that period should be. It will depend on the circumstances of the case and in some cases no extra time will be given. This amendment would only act to slow down the recovery of maintenance as it would give all parents with care up to 14 days to decide whether to make a claim for child support. At present 85 per cent of parents with care are content to make a child support claim immediately. We do not need to build in that 14-day delay with the slippage that would result.
	I turn now to Amendment No. 24 which relates to subsection (7) of Clause 3. This requires the parent with care to provide information for a child support assessment even if she has opted out. The amendment would have the effect of forcing all parents with care and claiming benefit to provide details of the non-resident parent, regardless of whether they had opted out of child support. In practice, the CSA would have to obtain information about non-resident parents, even though in some cases the information could not be acted upon. This amendment would have the effect of forcing the CSA to waste vital resources in collecting and chasing information in cases where it was not going to collect maintenance. This would not be sensible. The information would not be used; it would soon become out-of-date; and the efforts by the CSA would have been pointless.
	The amendment could also cause some distress to those parents with care who have good cause, who would be asked to give information even it were not necessarily followed up--for example, where the child was conceived after a case of rape--at a sensitive and difficult time.
	I am sorry to have taken so long but these are technical issues. It is right to probe them. All the amendments in this group would introduce more complications and delay in the recovery of child maintenance. We are trying to eliminate that; we are trying to get the balance right between protecting the parent with care, without at the same time giving perverse signals to an abusive non-resident parent. We have taken a great deal of advice. All the advice given throughout our consultation period--we have had a Green Paper and a White Paper--suggests that we have now got the balance about right. I hope that my answer may have persuaded the noble Baroness of that.

Baroness Buscombe: My Lords, I thank the Minister for her full and clear response to these probing amendments. I am glad that the noble Baroness agrees that it is right to probe these arrangements which have caused concern among many in different organisations. All of us have been consulted on these issues.
	In tabling these amendments, safety of the aggrieved parent with care and the children is our primary, overriding concern. I hope, therefore, that the Government have got the balance right. It is a difficult issue. It is difficult to get it right. I hear what the Minister says with regard to the proposed time-scales which could mean more delays and problems. I shall read with care in Hansard what the Minister said. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 22 to 24 not moved.]
	Clause 4 [Default and interim maintenance decisions]:

Baroness Buscombe: moved Amendment No. 25:
	Page 4, line 38, at end insert--
	("(6) The regulations shall make provision for the calculation of the difference between the amount of child support maintenance paid by the non-resident parent pursuant to any default or interim maintenance decision and the amount of child support maintenance which would have been payable by the non-resident parent had the Secretary of State completed a maintenance calculation at the time of that default or interim maintenance decision."").

Baroness Buscombe: My Lords, this amendment relates to default and interim maintenance decisions under Clause 4. As drafted, the Bill lays down a penalty while proposing that where a non-resident parent has been overpaying, that payment should not be returned. The Explanatory Notes state that this is necessary because it will encourage people to fill in the forms expediently. On the face of it that might seem a good idea. However, is it fair? Is it reasonable?
	Perhaps I may use an analogy. If one overpays one's taxes, for whatever reason, that overpayment is returned--eventually and without interest! We are concerned that the approach in Clause 4 is too draconian and will not help in the Government's real efforts to build the credibility and esteem of the Child Support Agency. I beg to move.

Baroness Hollis of Heigham: My Lords, currently we have a system of punitive interim maintenance assessments which are imposed where full information cannot be obtained or the non-resident parent fails to co-operate with the Child Support Agency. However, this scheme does work. Assessments are generally very high (averaging nearly £90 a week) and the vast majority of non-resident parents due to pay an interim maintenance assessment pay nothing at all (almost 90 per cent). This allows large arrears to build up, making enforcement difficult. This is a particular problem where the non-resident parent is self-employed. It was a scheme introduced by the previous administration in the hope of being punitive and therefore encouraging people to apply. But it had the reverse consequence of arranging such high levels of maintenance that none of it could ever be collected. As a result, arrears mounted.
	We believe that the key factor in the low level of compliance is that non-resident parents know that they will often have to pay substantially less when a full maintenance assessment is completed. That is because, when the required information is finally provided, the interim maintenance assessment is replaced by a back-dated full assessment--usually at a substantially lower rate. So the incentive effect of the interim maintenance assessment is lost and those irresponsible parents who wish to delay meeting their responsibilities to their children are free to do so at no cost to themselves. It is a mess.
	The new, simpler scheme will mean that in most cases we shall be able to make decisions about maintenance in a matter of days. Where a non-resident parent refuses to provide information about his income, we shall be able to obtain it either direct from his employer or, in self-employed cases, via the Inland Revenue. Parents who refuse to provide information can face fines of up to £1,000.
	It is important to get maintenance flowing quickly, so where a final decision on liability cannot be reached straightaway, and where the non-resident parent refuses to provide enough information to allow his earnings to be estimated, we are introducing a simple system of default rates to get maintenance flowing.
	Default rates of maintenance will allow the CSA, as a last resort, to get maintenance flowing at a "safe rate". Rates will be set at a level broadly reflecting the average income of the non-resident parent, with rates of £30, £40 or £50 a week according to whether one, two, three or more children are to be maintained. This will prevent large amounts of arrears building up and, because default rates will be put in place quickly, they will be easier to enforce.
	If I understand its purpose correctly, Amendment No. 25 would provide that, when a final assessment is made following a default or interim maintenance decision, and the assessment is lower, the non-resident parent would be able to recover the overpayment. Where the final assessment is higher, and there is an underpayment, the parent with care would be able to recover the underpayment. We do not believe that it is appropriate to provide this retrospective supersession of all decisions made under Section 12 of the Act.
	In the case of default decisions, we intend that when full information is available the full liability will be put in place from the date when the information was obtained. Maintenance liability for the past period will be recalculated only if the full assessment is higher than the default rate. We have adopted this approach because we want parents to provide information quickly and to pay the default rate in the meantime, but also not to gain any advantage by delaying the process. As I said earlier, this is the key reason why, currently, most interim maintenance assessments fail to result in any maintenance payment at all.
	So, if someone has a default rate of £30, and it turns out that the full assessment should have been £50, we shall collect arrears for the past period. However, if the full amount turns out to be £20, we shall put that assessment in place only from the date when the full information becomes available.
	The CSA will impose default rates only as a last resort--in those cases where the non-resident parent refuses to co-operate. If a non-resident parent genuinely does not know his level of income, and co-operates with the agency, we shall be able to use estimated earnings to arrive at a full calculation of liability. That is why the analogy is not exact with the system applied by the tax authorities. In proposing the amendment, the noble Baroness basically assumes that a default rate is somehow neutral, and the underpayments and overpayments should be treated in the same way as in the tax system. No, the default rate, which we expect to be a rarity, is still a rate that is set because the non-resident parent is defaulting. It is meant to focus his attention on paying his maintenance. It is not meant to be punitive; it is meant to be realistic.

Earl Russell: My Lords, does the Minister have information to hand as to what proportion of the alleged defaults result from the inefficiency of the CSA?

Baroness Hollis of Heigham: My Lords, under the new system we are expecting the assessment to be made, on average, in six days and the money to be flowing in six weeks. I realise that all the noble Earl's amendments would so complicate the formulae that we should not have a hope in hell of meeting those timetables. But the rest of us believe that, providing the Government hold to their clear, simple, clean, decent, transparent and right approach, we shall have the money flowing, there will not be the errors that the noble Earl anticipates, and, as a result, questions of default will arise only where the non-resident parent wilfully fails to co-operate. If he co-operates but does not have exact information, as I say, we shall do a rough assessment of his estimated earnings.
	So the default rate is a rate that is set because he is defaulting. It is not meant to be punitive. It is realistic, but it is meant to discourage what could be described colloquially as "messing the agency around". If he has paid more than he would have done had he responded promptly, that is a consequence of his delay and his failure to co-operate. If he has paid less, we shall chase up the shortfall so that he is not rewarded for delaying his maintenance payments and so that we see the children getting the money. As I say, this approach is not punitive. It is based on average earnings or average income of non-resident parents, unlike the scheme introduced by the previous administration. But there must be an incentive for non-resident parents to supply information quickly and to co-operate. Although I am sure that it is not the noble Baroness's intention, Amendment No. 25 would remove that incentive and might actually encourage the non-resident parent to play the system. I am sure that she does not want to see that happen. Given that explanation, I hope that the noble Baroness will withdraw her amendment.

Baroness Buscombe: My Lords, I thank the Minister for that response. Perhaps I may make it clear that there is no question of our wanting anyone to be rewarded for delay or default. However, we have already spoken about balance. I remain concerned that there is a question of balance here. I am very excited about the proposed timetable for the future. I hope that we shall soon know when that will become a reality. Obviously, it will make a big difference to the number of cases which might be termed cases of default. I shall read the Minister's response carefully in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 5 [Departure from usual rules for calculating maintenance]:

Baroness Buscombe: moved Amendment No. 26:
	Page 5, leave out lines 17 to 21 and insert ("shall make the application in writing").

Baroness Buscombe: My Lords, this amendment is concerned with applications for the variation of the usual rules for calculating maintenance. Under the Bill as presently drafted, a person who applies for a variation,
	"need not make the application in writing unless the Secretary of State directs in any case that he must".
	Why not? While not wishing to be bureaucratic for the sake of it, variations are important matters; they can have long-term consequences. We believe that there should be a permanent record in the form of a signature as opposed to an informal telephone conversation or meeting, where details may be misinterpreted or simply forgotten. I beg to move.

Baroness Hollis of Heigham: My Lords, I am now slightly baffled, and perhaps I may check this point with the noble Baroness. As I understand it, she did not move Amendment No. 4 and she is now moving Amendment No. 26. Is she speaking also to Amendments Nos. 27, 30 and 31?

Baroness Buscombe: No, my Lords, I shall not move those amendments.

Baroness Hollis of Heigham: My Lords, I shall not spend a great deal of time on this matter. What the amendment would do is require all applications to be made in writing rather than allowing straightforward applications to be taken over the telephone. Additionally, applicants would not have to specify the ground on which they are applying.
	Two recurring complaints made about the existing scheme surround its complexity and the fact that it takes the agency so long to notify non-resident parents of their liability. A recent survey undertaken by the CSA indicated that use of the telephone is considerably faster: 79 per cent of the CSA's clients positively preferred it; and approximately only 2 per cent of them were hostile to it, and that may have been because we telephoned them at work, or for a similar reason. They liked the use of the telephone because it allows discussion and a better understanding of what is going on. Certainly, when I listened in on client helplines, I realised that both parents with care and non-resident parents found the personal contact over the telephone to be valuable. By virtue of use of the telephone, maintenance becomes more reliable.
	Under the current departure scheme that we are proposing, it is clear that most of the applications can be dealt with satisfactorily over the telephone because the information is simple and straightforward. We do not believe that in the reformed scheme the information should be put in writing. Use of the telephone avoids unnecessary delay and use of paper, and possibly also allows us to ensure that maintenance flows more quickly.
	However, an exception would be made--I believe that this point is important and may reassure the noble Baroness--where, for example, the application raised particularly difficult or complex issues. Such applications would not be dealt with by staff on a straightforward administrative basis. However, when a simple piece of information is placed on the record--for example, where the flow of earnings is different just before Christmas--the form can be adjusted and that is that.
	However, a typically difficult application would be one where the parent with care alleges that the income that he has declared is inaccurate because he is living a different lifestyle and there is a considerable variance. Where there is such a dispute, if I may express it that way, the case is likely to go to a tribunal. In difficult and complex situations, we would require all applications to be made in writing in order to furnish the basis of an appeal to go to the tribunal. In such a case, we would also require the applicants to specify the grounds upon which they were applying. The system would not be effective if we ended up with a mountain of correspondence saying, "I want a variation because my liability is too high"--or too low.
	In complex situations, our view is that it is only sensible to require applicants to state the grounds upon which they are applying for a variation. That will allow the CSA to distinguish applications which have been made on recognised grounds from those which, for example, are spurious in the sense that they cannot be met within the formula. That would avoid delays.
	I hope that I have assured noble Lords that most cases can be dealt with by telephone but that in exceptional cases involving dispute, which are likely to go forward to a tribunal, we would want to ensure that there was a paper base. I hope that with that assurance the noble Baroness will feel able to withdraw her amendment.

Baroness Buscombe: My Lords, before the Minister sits down perhaps she can reassure me as to where that is stated. I do not believe it is stated on the face of the Bill that more complex cases will be written down.

Baroness Hollis of Heigham: My Lords, this issue comes under the territory of regulations rather than on the face of the Bill.

Baroness Buscombe: My Lords, I thank the Minister for her response, which gives me some reassurance. In a way, I regret that it is not stated on the face of the Bill. I am concerned about the more complex cases which involve dispute, such as the example that she has given. I believe that it is crucially important that in those cases the written word is there for everyone to see.

Baroness Hollis of Heigham: My Lords, I should be very happy to write to the noble Baroness and give her what I might call a "route map" of how the matter would be dealt with. That may reassure her that the matter is being pursued properly. If she has any concerns, we could have a discussion on the matter.

Baroness Buscombe: My Lords, I thank the Minister for that response. I would very much appreciate such a letter. On that basis, with pleasure I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 27 not moved.]

Baroness Buscombe: moved Amendment No. 28:
	Page 6, line 2, leave out ("one of the conditions") and insert ("the condition").

Baroness Buscombe: My Lords, in moving Amendment No. 28, I wish to speak also to Amendment No. 29, which concerns the departure from usual rules for calculating maintenance. In our view, these amendments are straightforward. If an application for variation were made and, after preliminary assessment, the Secretary of State concluded that there was some merit in the application, the non-resident parent would still have to pay either the full or a lower rate at the discretion of the Secretary of State. Given that the new variation scheme is being introduced because the existing formula may not be fair, we believe that it is right that that parent should have to pay only the default rate until the appeal is determined. I beg to move.

Baroness Hollis of Heigham: My Lords, as we have heard, both the amendments relate to the intention to allow the Secretary of State in appropriate circumstances to require the non-resident parent who has applied for a variation to make regular payments of child support at a pre-agreed level as a condition of having his application considered.
	In the reformed scheme, applicants will be able to apply for a variation before, as well as after, a final maintenance calculation has been made. Where a variation application is made before a decision has been reached on the original maintenance application, the Secretary of State may make either a final maintenance calculation which takes account of the outcome of the variation application or an interim maintenance decision under Section 12(2) where he is unable to deal with the variation application straight away.
	The amount of child support fixed by an interim maintenance decision will be calculated in exactly the same way as a final maintenance decision, had no application for a variation been made. The interim decision will, in effect, amount to an unvaried maintenance calculation. Where an interim decision is made, new Section 28C provides that, where the applicant for the variation is the non-resident parent, the Secretary of State may require him or her to make regular payments of maintenance while the application is being considered.
	Similar provisions will apply where the non-resident parent makes a variation application at any time after a maintenance calculation has been made. In either circumstance, the intention is that, where the reasonable expectation is that the application will fail, the non-resident parent will be required to continue to pay the amount previously calculated--that is, the interim amount or the final amount, as appropriate.
	If, on the other hand, it appears likely that the variation application will succeed--for example, where there is agreement on both sides as to who has incurred contact costs in terms of travelling--the effect on the interim maintenance decision or the final maintenance calculation, as applicable, will be anticipated and the non-resident parent will be asked to pay the appropriate reduced amount.
	Your Lordships will appreciate that on this basis no non-resident parent will ever be asked to pay more under the regular payments condition than he would otherwise be paying under the normal rules, or the amount which the Secretary of State anticipates would be payable were he to agree to the variation.
	However, the amendments before us seek to ensure that the non-resident parent would be obliged to make regular payments at one of three fixed rates. We acknowledge that the proposal has merits of transparency and simplicity. However, the problem is that the fixed sum in any particular case is likely to bear little or no relationship either to the maintenance calculation which has already been made, based on the information which the non-resident parent has already provided, or to the amount which he might be expected to pay if the variation were to be agreed.
	The intention of the regular payments condition is to ensure that child support continues to flow while a variation application is being examined. However, it is only right that the amount payable should be set in a way that reflects the non-resident parent's circumstances. In our view, the inflexibility of the amendments--there may be a wide gap between what the amendments lay down and what we expect a non-resident parent eventually to pay--could produce an outcome which is unfair.
	It would mean that non-resident parents with existing liabilities for amounts which were lower than the suggested set amounts would be penalised unreasonably. The Secretary of State would be requiring them to pay more maintenance at a time when they were asking him to agree that in their particular circumstances they should be paying less. Perversely, it could encourage non-resident parents with higher liabilities to apply for a variation on spurious grounds simply as a means of securing a temporary reduction in the amount that they have to pay.
	The whole purpose of the provision in question is to ensure that unnecessary debts are not built up during the variation process. We want children to receive their maintenance reliably. We do not want non-resident parents to use variations as a reason to delay the payment of the ultimate maintenance. However, we are concerned to ensure that the amount payable under the regular payment condition is set on a reasonable basis which bears some relation to what we expect the parents to pay.
	We believe that the approach that we are taking delivers an outcome which is fair and reasonable. I hope that, on reflection, the noble Baroness will not press her amendments.

Baroness Buscombe: My Lords, I thank the Minister for her response and beg leave to withdraw the amendment

Amendment, by leave, withdrawn.
	[Amendment No. 29 not moved.]
	Schedule 2 [Substituted Schedules 4A and 4B to the 1991 Act]:
	[Amendments Nos. 30 and 31 not moved.]

Lord Higgins: moved Amendment No. 32
	Page 102, line 34, leave out from ("means") to ("expenses") in line 35 and insert ("any").

Lord Higgins: My Lords, it may be convenient to discuss with this my Amendments Nos. 33 to 46, as well as Amendment No. 47, tabled by the noble Earl, Lord Russell, and also included in the list, which appears much later in our proceedings than I had expected, given the initial grouping.
	The amendments are about variations. It is common ground across the House that there is an overwhelming case for simplifying the Child Support Agency arrangements. However, the more simple one seeks to make the system, the more important become the variations, or departures, as they are also called. The amendments spell out various items that need to be considered. Our aim is to enable the House to take a view on whether each item is an appropriate one to take into account.
	I am confused by the lay-out of the Bill on page 102, where,
	"Part II
	Substituted Schedule 4B"
	appears above,
	"Schedule 4B"
	I presume that that is because of subsequent amendments at an earlier stage.
	Amendment No. 32 deletes,
	"'special expenses' means the whole, or any amount above a prescribed amount, or any prescribed part, of expenses"
	and replaces those words with,
	"'special expenses' means any expenses".
	The other amendments specify what those expenses might be. The question is what one should deduct from the income of the absent parent when deciding how much he ought to contribute towards maintenance before arriving at the percentage that he will pay for each child.
	Amendment No. 33 refers to,
	"exceptionally high travel costs, exceptionally high housing costs, travel to work costs, illness or disability costs."
	Some of those items are reflected in later amendments, such as Amendments Nos. 34 and 35. A number of those who have been asked to contribute to the maintenance of a child under the existing legislation have stressed that to earn enough to pay for that maintenance they have to travel to work. On some occasions, that can involve considerable cost. The question is whether those costs should be taken into account. I should be grateful for the Minister's views.
	Amendment No. 36 would take account of relatives such as elderly parents and Amendment No. 37 relates to payment by the absent parent towards the education of children from the first or second marriage. The Bill says that the absent parent's income can be adjusted to take account of school fees, but only for boarding school education. No doubt the Minister will comment on that.
	Another important issue is whether mortgage payments should be taken into account, even if the non-resident parent keeps a less than 50 per cent. interest in the matrimonial home. Expenses relating to handicapped children or debts incurred by the parents before the relationship broke up are other items that could be taken into account.
	Our aim is to list the various circumstances that could be taken into account. Obviously, if they were all taken into account, we would almost be back where we started. Some of the possible items have greater merit than others. Debts incurred during the previous relationship and the situation with regard to the matrimonial home are two important examples.
	At this stage, I am merely asking for the Minister's reaction to the various items that are specified. In the light of what she says, we shall consider whether we ought to return to the matter on Third Reading. I beg to move.

Earl Russell: My Lords, a good many years ago I had to attend a conference in the middle of Windsor Great Park. My host had obligingly provided me with a map, on which the route appeared to be easy to follow--it was a matter of first right and first left. After several hours driving round Windsor Great Park, I finally succeeded in arriving very late, very hungry and very irritated. I tackled my host about the map. He said, "Oh, but I left out all the turnings that you did not need to take for the sake of simplicity."

Lord Higgins: That sounds somewhat like the political thread that the Liberal party has pursued over a number of years, going left, right and left again.

Baroness Hollis of Heigham: And none of the electorate has been able to follow the map.

Earl Russell: None of the electorate?

Baroness Hollis of Heigham: Only a very modest proportion of the electorate.

Earl Russell: At the last local elections, it happened to be just about as big a proportion of the electorate as voted for the noble Baroness's party. Is not that also significant?

Baroness Hollis of Heigham: But most of the electorate decided that the maps produced by all the parties were not worth reading or studying.

Earl Russell: And that is a reproach to us all, which we must all accept equally. I am sure that the Minister understands the point of my story about simplicity. I have noticed over the years that governments get into trouble whenever they set out to produce a Bill that is driven by a single, isolated purpose. I think of football spectators and dangerous dogs. The Minister has explained today and on many other occasions that the whole of the Bill is driven by the desire for simplicity. It will not achieve that.
	I have put my name to this group of amendments and tabled my own Amendment No. 47, which I understand to be consequential on Amendment No. 46, tabled by the noble Lord, Lord Higgins, which authorises the taking into account of any other circumstances. It is the proverbial "some other reason why".
	In Committee, the Minister said:
	"We believe that parents should put children, not other expenses, first".".--[Official Report, 8/5/00; col. 1333.]
	I do not think that she will dispute that that is a fair summary of her view. However, the situation is not that simple. In present law, we are legally obliged to put debts to the Crown before debts to anything else. That has been a legal principle since the reign of King John. I hear of no proposal from the Treasury that it should be changed. Frankly, I should be extremely surprised to hear of any such proposal.
	If a parent owes a back payment of income tax of many thousands of pounds, they are not legally allowed to put their child's maintenance before it.

Baroness Hollis of Heigham: I am sure that the noble Earl will confirm that on every occasion I have said that people should pay their taxes and their national insurance first and then pay their child support from the net income. There is no difference between us on that.

Earl Russell: The Minister certainly did not say that on the occasion that I quoted. I invite her to check it. I hope that she will repeat what she has just said on every occasion in future.
	The other exception is expenditure that is necessary to earn the income out of which the maintenance shall be paid. Someone who cannot earn an income cannot pay maintenance. The Minister knows as well as I do that there were a considerable number of such cases under the 1991 Act. We hope that there may be slightly fewer under the Bill, because the level of maintenance has been set lower for everybody, regardless of whether they have special expenses, in the hope of covering any special expenses. Of course, that means less money for children in some cases where it would not have been necessary. But it will not necessarily cover the special expenses of those who have them. For example, some people who commute to work in London have to commute considerable distances. Their expenses are not necessarily on a level with those who walk to work.
	There is no allowance for payment for elderly relatives, and I am extremely glad that the noble Lord, Lord Higgins, has included that in an amendment. Beyond a point, very elderly relatives may be as totally dependent as children. It is not self-evident that the children necessarily, in all cases, come above the elderly relatives. There are many people, known personally to me, on whom it would be extremely difficult to enforce any such principle because they would believe that they were being asked to do something morally wrong.
	Beyond that, there is the fact that circumstances may arise, as they have done since 1991, which no one now foresees. It is in the essence of the principle of the Bill that no variation may be prescribed unless it has already been set out in regulations. Anything which has not been foreseen by those who draft regulations cannot be responded to.
	I am sure that the Minister remembers a case about which we corresponded. When we last heard, the facts were in dispute. But let us assume that they were as alleged, because in some cases, they could be. This was a woman, with a daughter, who had remarried. Her daughter eloped with her second husband, or so it was alleged. She felt a conscientious objection to paying maintenance in those circumstances.
	Let us take the case of the man who made a large capital settlement on his wife. She remarried. Her husband invested in property bought at the peak of the boom in 1988 and then went bankrupt. The first husband was dunned a second time. I had a long correspondence about that with the Minister who was entirely sympathetic. But the legislation allowed no discretion. It was impossible to respond to the unforeseen circumstance. That simply is not the real world. If we do not delete that provision in Schedule 2, which says that nothing may be prescribed unless it is included in regulations, the Minister will find herself in Windsor Great Park without a map.

Baroness Hollis of Heigham: My Lords, the amendments which we discussed earlier surrounded the more technical aspects of variations. These amendments relate to the grounds on which a variation from the normal rules may be agreed. We discussed many of them in Committee so I am rather surprised that some of the amendments have been retabled. However, I am happy to try to respond to your Lordships' queries.
	We are replacing a complex formula with a simple system of rates which will lead to a better, faster, fairer and more transparent support system. A calculation will be provided in which we recognise that every parent has different kinds of commitments. But the new rates will leave most with at least 75 per cent and on average more like 80 per cent--given that the average lone-parent family consists of under 1½ children--of their net income to meet those expenses.
	But we recognise that there will always be cases where it is inappropriate to apply the normal rules without some flexibility. Therefore, it may be worth reminding your Lordships what we are seeking to do.
	Essentially, we are saying that there are to be two broad grounds for variations. One is where the information given to the CSA on the non-resident parent's income is incorrect and invalid and needs to be corrected. There may or may not be fraud. The second is where there are exceptional costs in supporting the children of the first family and where the maintenance payment, were that to come on top, unabated, would be unfair. There are those two simple grounds.
	In other words, we are determined to keep a tight rein on the grounds on which that variation can be agreed. A shopping list of amendments has been suggested this evening--that is, to look at travel-to-work costs, housing costs, the costs of supporting elderly relatives, and other costs. It was said in the other place that,
	"if they load a new set of variations on to the simplified formula, the system will quickly revert to something approximating the present highly complex system".
	That was said not by my right honourable friend Mr Jeff Rooker or my honourable friend Angela Eagle, who are the Ministers, but by a Conservative Member of the Committee, Edward Leigh. The noble Lord, Lord Higgins, made the point tonight that if the Government were minded to go in that direction, we should have taken all of the complexity out of the assessment and put it back in again in the form of variations or appeals. A very high proportion of current cases would thereby go on to appeals or variations because different assessments would come into play.
	What is the point? Why bother with reforms of the agency at all if all we are doing is displacing complexity from the entry, which is assessment, to an exit point, which is variation? Why bother? Why not stay with the existing complexity of the current scheme? That is what it would mean. Let us be in no doubt. If you take into account housing costs, you must also take into account travel-to-work costs. We shall be reinventing the present complexity. For example, there are 50 different mortgage systems. Every time the rate changes, all those calculations will need to be redone. As a result, delays, errors and arrears will creep into the system. Why bother? We would be chasing paper rather than chasing the parents who should be paying the maintenance.

Lord Higgins: My Lords, the noble Baroness is making it black and white. There is obviously an intermediate stage. Some variations may be desirable. They would obviously increase the complexity but would not take one back to the kind of complexity which exists at present. One cannot simply say, "Either we have no variations at all or we have masses of variations". There are intermediate stages and the particular items specified need to be considered on their merits.

Baroness Hollis of Heigham: My Lords, the variations explained in this shopping list of amendments take more factors into account than is currently the case. The noble Lord said that there is an interim stage. But he has made the system more complex even than that which we currently have. That is no interim or half-way house. That is 120 per cent of what we currently have. That cannot be the position which the noble Lord wants to adopt.
	I am not saying that there will be no variation; there are two broad grounds on which there will be variation. There has been consultation on this proposal which has received broad support. One ground is where there is misinformation, whether deliberate or otherwise, which needs to be corrected. Therefore, there can be variation. The second ground is where the cost of maintaining the child of the first family is already being incurred in some form or other by the non-resident parent and therefore should be taken into account when the amount of maintenance is determined.
	We have considered carefully what should be the nature of those exceptional cases and circumstances. We do not suggest that the expenses and costs to which the noble Earl, Lord Russell, and the noble Lord, Lord Higgins, referred are not proper items of expenditure. We are saying that they are costs and expenses which the non-resident parent should meet from his income after meeting his primary responsibility to his children, and not before. Variations must be genuinely exceptional.
	What are we suggesting? We want to give more help to non-resident parents who keep in touch with their children. To that end, we are extending the nature of the contact-related expenses which we are prepared to recognise. At present, it is only the travelling costs. We shall allow overnight stays as a more reasonable estimate of the costs incurred in maintaining contact. We believe that that is positive.
	But Amendments Nos. 33 and 34 would allow the non-resident parent who maintained contact with his child to claim a variation in respect of any and all his expenses, regardless of whether or not they are in any way related to the contact arrangements. That would mean that he could include his housing costs, his travel-to-work costs and, indeed, any other costs. So we should be back to complexity.
	I turn to Amendments Nos. 35, 41 and 43. As I said earlier, the position here is that under the new percentage-based approach, non-resident parents will normally be left with at least 75 per cent of their disposable income out of which to meet other costs, including the costs of housing and travel to work.
	If we were to introduce an allowance on the grounds of long-distance travel to work, we would also have to recognise the opposite aspect, as Amendment No. 43 suggests. Travel to work tends to be a rural problem. We would therefore have to recognise higher housing costs for those non-resident parents who live close to work but in an expensive area. As I have said, all of that reinvents the complexity of the current system.
	As regards the income of the person with care, this House has already disposed of that matter in a vote tonight, so we shall not revisit it. However, the noble Lord, Lord Higgins, said that the two variations with which he was most concerned were associated, first, with debts incurred in the previous marriage and, secondly, where a parent was paying the mortgage on the matrimonial home but where, for example, there was no equity remaining to him. I would be grateful if the noble Lord would confirm that that is where his concerns are most focused. Although, for obvious reasons, I cannot touch on the rest of the concerns he identified, I think I can be helpful to the noble Lord here. Indeed, we intend to provide for both such variations. I am glad to have the opportunity to expand on that.
	The amendments are unnecessary. We are already providing for debts of the relationship to be recognised as special expenses. This ground is included on the face of the Bill at paragraph 2(3)(c) of Schedule 4B to the Act, as amended. That appears at the top of page 103. As a mortgage is a debt, where the non-resident parent has retained a liability to pay the mortgage on the property where he used to live with the parent with care but is not retaining equity, we are already intending to recognise those payments as legitimate exceptional expenses.
	I hope that the noble Lord, Lord Higgins, will think that we are already meeting the major variations on which he has focused tonight--his intermediate stage, let us say--and that he will be content with that reply.
	The effects of Amendments Nos. 37, 44 and 45, however, would be to allow the non-resident parent to offset part of any costs he incurs in providing an education for his child against his ongoing maintenance liability for that child. We believe that it is reasonable that the costs of maintaining the child--the boarding part of school fees, for example, where a child attends a boarding school--should be taken into account because the boarding, that is, the food, housing, heating and so forth would otherwise have to be provided by the parent with care. To some degree, he is abating her outgoings. That is why we believe that it is reasonable. However, the same does not apply to school fees.
	Paying educational school fees, whether for a day or boarding school, is a choice made by the parents. It comes within the same category as choices on expenses of elderly relatives and the like. They are free to make that choice but they pay for it out of their income. In our view, it is not an allowable expense or variation that should be included at this stage. Why should private education for a child take priority over, say, the care of an elderly parent? We do not believe that is right. We find ourselves unable to accept that.
	Amendment No. 46 seeks to ensure that the Secretary of State may agree to a variation in any case where the income to which he has had regard in his maintenance calculation does not reflect the financial circumstances of the non-resident parent. In summary, the effect would be to allow a variation wherever there is a mismatch between the current and planned definitions of assessable income.
	Again, I think we can help the noble Lord, Lord Higgins. The provisions already provide for a variation to be agreed where the lifestyle of the non-resident parent is inconsistent with the declarations made to the agency. We have every intention of allowing parents with care to apply for a variation where the rules of the new scheme, insofar as they relate to the calculation of the non-resident parent's income, have significantly short-changed them. That is covered in paragraphs 4(2)(a) to (d) of Schedule 4B to the Act, as amended, at the top of page 104.
	I turn to Amendment No. 32. The position is that non-resident parents who apply on the grounds of certain of the prescribed special expenses will need to establish, as now, that the costs they are incurring exceed, either singly or in aggregate, a threshold below which a variation cannot be considered. That ensures that only unusually high costs should be considered a good enough reason for a parent to reduce his child maintenance payments. Again, I hope that your Lordships will agree that we are meeting that.
	As your Lordships will recall, the threshold under the departure scheme is £15 per week. In the new scheme, however, we plan to apply a threshold on a two-tier basis: £15 per week for parents with a net income of £200 per week or more, but a lower threshold, which we think decent and fair, of only £10 per week for parents with lower net earnings; that is, below £200 per week. We think that that will positively help parents who are less well off to get more help towards their special expenses.
	I turn finally to Amendment No. 47. The position is that we intend to provide in regulations that once a variation has been agreed, maintenance calculations will be varied in a consistent way. Although the exact intent behind the amendment is not fully clear, the effect will be to remove the power to provide this in regulations. That could lead to inconsistency and inequality of treatment between one case and another. We do not believe that that is right.

Earl Russell: My Lords, I thought that I had explained the purpose of Amendment No. 47; that is, to allow a variation for something which had not been foreseen when regulations were drafted.

Baroness Hollis of Heigham: My Lords, as drafted, our regulations allow for two broad grounds. The first is where there has been a mis-statement of income. I have been trying to give assurances on that. The second is where a non-resident parent is contributing to the maintenance of the child in other ways than direct maintenance payments. I refer, for example, to paying for the mortgage; continuing to pay for the debts incurred in the previous relationship, and in terms also of providing maintenance. We do not conceive of any other circumstances. Therefore, we do not envisage the need for the amendment.
	I re-state that we want to move to a child support system that is simple, efficient, easy to understand, of minimum complexity and with as little scope for dispute as possible. I hope that the noble Lord, Lord Higgins, will agree that we are able to address the areas he highlighted, including variation in income, debts and the matrimonial home. With that, I hope that the noble Lord, Lord Higgins, will feel able to withdraw his amendment.

Lord Higgins: My Lords, I am grateful to the Minister for that explanation of the principles which have determined a selection of variations which the Government feel is appropriate. We shall need to consider the various possibilities against the two criteria she has outlined. I have slight doubts about some of the points made. I refer to education, for example. One does not live on bread alone. If a marriage is intact, the parents would certainly regard the provision of expense on education as leading, in the broader sense, to the maintenance of the child. That is a specific point.
	As regards debts, and so forth, the Minister has largely reassured me. However, we shall need to consider the various possibilities. Clearly, one cannot be at one end of the extreme or the other with regard to no exemptions at all or some exceptions. It is a question now of striking the right balance at the margin. In the light of what the Minister has helpfully said, we shall consider whether the marginal balance is in the right place. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 33 to 47 not moved.]
	Clause 10 [Appeals to appeal tribunals]:

Baroness Buscombe: moved Amendment No. 48:
	Page 9, line 38, leave out ("an appeal tribunal") and insert ("a county court").

Baroness Buscombe: My Lords, in moving Amendment No. 48 I shall speak also to Amendments Nos. 49 to 55. The amendments relate to Clauses 10 and 11 and refer to appeals to appeal tribunals and the re-determination of appeals.
	In tabling Amendments Nos. 48 to 52, we are highlighting our concern that the levels of maintenance are vitally important to all parties and to the children. There needs to be a system of appeal where appropriate cases can be reviewed. We believe that such appeals should be to district judges at county courts who are already experienced in dealing with maintenance and have an existing and well-used procedure. District judges are not only well experienced in this sort of work but are given a wide discretion to take into account all the circumstances, including, for example, earning capacity of an absent parent, to ensure that justice can be done.
	It would be possible for the regulations to make clear that the formula would normally apply and exceptional circumstances would be needed before a court would adjust the formula. Even in criminal matters, citizens are entitled to appear before the court to ask that their individual circumstances be taken into account before a fine is imposed. Here, we are talking about assessments which may involve a person paying up to a quarter of their income for 16 years. We believe that it must be right that they have an opportunity to be heard in appropriate cases. An application to court would also enable the applicant to apply for funding by the Legal Services Commission, so that they could be assisted if that was appropriate or necessary.
	Although it is suggested by the Government that this would result in a significant increase in the work of the county court, we believe that that is unlikely. Ten years ago, before the CSA started, all maintenance matters were dealt with through the courts, and the courts were quite capable of coping. We are only talking here about the courts looking at a minority of matters where there are good grounds to appeal against an unfair assessment. The absence of such a right has led to much of the resentment that has undermined the current CSA, and the Bill before us now does not address that.
	I turn now to Amendment No. 53. The effect of this amendment is to provide that civil legal aid is available in certain circumstances for proceedings before the child support appeal tribunal. Briefly, while supporting the provision in relation to appeal tribunals--in speaking to this, as is suggested and made clear in the proposed amendments, I am speaking to the situation as it pertains in Scotland--we question whether a right of appeal can be considered as a substantive right if it is not accompanied by a mechanism to ensure that adequate representation can be provided. This amendment extends the provision of legal aid to child support appeal tribunals to ensure access to justice.
	I now turn to Amendments Nos. 54 and 55. These amendments refer to the report on the number of appeals completed and the publication of key decisions. The Social Security Select Committee published a report on the benefit appeals system on 24th May of this year. The committee said:
	"The Committee's fourth report ... reveals a disturbing culture of delay in the system of appeals to the Social Security and Child Support Commissioners. The Committee also found a chaotic and clearly unacceptable situation in the publication of decisions of the Commissioners, described by the chairman as, 'typically British, amateur, worst practice'".
	The committee also said:
	"On the availability of Commissioners' decisions, it was apparent long before we completed our inquiry that the Departments had acknowledged the extraordinary lack of information and agreed to improve the situation. We welcome this, but conclude that more definite plans should be made in order to assist appellants to find out what legal precedents there might be".
	The report criticised the fact that only around half of the key decisions of the commissioners are selected for reporting each year, and the committee called for a new system of publicising judgments. On that matter the report said:
	"We were astonished and alarmed at the chaotic and almost laughable situation which applies to the availability of Commissioners' decisions".
	The committee wants its conclusions to be implemented without delay.
	The Government, as we understood it, were supposed to be taking action in this area. The Social Security Act 1998 was supposed to simplify decision-making and appeals regarding social security, child support and vaccine damage payments. Many of the provisions were based on proposals made by the previous government.
	Last year, the Under-Secretary of State, Angela Eagle, in another place said:
	"The changes we are making will enable the Benefits Agency, Child Support Agency and Employment Service to provide a more helpful and accessible service to the public".--[Official Report, Commons, 2/3/99; col. 708.]
	More recently the Under-Secretary of State said that,
	"improvements have been made, but we are never complacent and will continue to do what we can to improve the accessibility of the system and its effectiveness".--[Official Report, Commons, 19/6/00; Col.9.]
	The amendments tabled implement the Select Committee's key recommendations on reporting and publicising, and decisions of the Social Security and Child Support Commissioner. If the Government are really committed to making the appeal system more accessible, they should give their support to these commonsense amendments that provide freedom of information about the decisions of the commissioner. I beg to move.

Earl Russell: My Lords, I congratulate the noble Baroness, Lady Buscombe, on tabling those amendments. That Select Committee report is a powerful document. I hoped that we would do something with it. I had not worked out what; I think she probably has. We view these amendments with a great deal of sympathy, and I hope the Minister will do likewise.

Baroness Hollis of Heigham: My Lords, we discussed assessment earlier today. Then we discussed variations. A comment I meant but failed to make in response to Amendment No. 47 was that if unforeseen circumstances crop up in the future we can respond by making regulations under existing powers in the Bill, which I think was a point that the noble Earl, Lord Russell, thought I might clarify by placing it on the record. We now, of course, are on to the third step, which is appeals.
	Amendments Nos. 48 to 52 relate to Clause 10. That clause sets out clearly the child support decisions which carry a right of appeal. Our intention is that in the reformed child support scheme liability will be established quickly. We want the agency, wherever possible, to settle disputes without the need for a formal appeal. That is why we hope to put in place an effective disputes service for parents who think a particular decision about their liability is wrong. However, we recognise the need for a right of appeal to an independent body with legal expertise to ensure that decisions are made fairly, and that parents' concerns can be given a full hearing if issues cannot be settled in discussions with the agency. The kind of issue I am referring to is where there is a dispute about whether his or her income as reported affects his or her lifestyle.
	As is the case now, in the reformed scheme appeals may be made against decisions relating to child support liability; where a benefit penalty is imposed, because a parent with care claiming income support opts out of child support without good cause, a right of appeal will still arise. There will also be rights of appeal against financial penalties for late payment of maintenance and--if and when these are introduced--fees. The proposals in the Bill build on changes to the appeals system for child support introduced from June 1999. These changes were part of the move to a simpler, more streamlined decision-making and appeals process across the DSS.
	Let me turn to Amendments Nos. 48, 51 and 52. These amendments would give child support clients the right of appeal to a county court, rather than an appeal tribunal. I do not accept that this is the right way forward. The court system failed parents in the past. There were real difficulties in getting maintenance orders enforced and non-resident parents were often able to avoid paying maintenance, with the result that children were left in poverty. The courts were widely perceived as having failed to protect children's rights. The court system is adversarial. I think that parents, particularly parents with care, are more likely to feel at ease in an informal tribunal setting. It could result in further delays and may cause confusion because we are crossing between jurisdictions; for example from the CSA to the courts. The courts would also be substantially more costly--around £20 million a year compared with £5.5 million for the appeals service.
	The tribunal system, on the other hand, provides parents with an impartial re-examination of the decision under appeal. A tribunal reaches its decision by establishing the facts of the case and applying the law to those facts. Tribunals comprise only those people with the qualifications and expertise required properly to determine the appeal. Every tribunal will include, or be chaired by, a legally qualified person. Where individual appeals involve points of special difficulty tribunals will have access to expert advice.
	I turn now to Amendments Nos. 49 and 50. These seek to place on the face of the Bill a right of appeal to a tribunal against the level of the maintenance assessed. These amendments are unnecessary. Parents already have a right of appeal against a decision about whether any child support maintenance is payable and, if so, how much.
	Amendment No. 53 seeks to extend legal aid in Scotland to people with child support cases being heard by appeal tribunals. The amendment is not appropriate for inclusion in the Bill as responsibility for legal aid in Scotland has been devolved to Scottish Ministers and to the Scottish Parliament. It would be a breach of the convention agreed during the passage of the Scotland Act for this House to be involved in that debate.
	The design of the appeals system, which applies throughout Great Britain, recognises that the majority of appellants do not have a detailed knowledge of the legislation. Proceedings before appeal tribunals and commissioners are, therefore, inquisitorial in nature, unlike the court-based adversarial system. Appeal tribunals and commissioners do not rely solely on the evidence presented by the parties to the appeal, nor do they expect the appellant to point to the law in support of their appeal. Therefore, they would not normally be in receipt of legal aid. Legally qualified panel members and commissioners provide the necessary legal input.
	The role of departmental officers, including lawyers, in proceedings before tribunals and commissioners is to act as an amicus curiae. They inform the tribunal or commissioners of any evidence which is relevant to a decision, irrespective of whether the evidence assists the appellant or the department. They do not assume a defensive role. The use of legal aid as a matter of routine would alter the fundamental informal nature of appeal tribunal hearings.
	I turn finally to Amendments Nos. 54 and 55, which seek to place obligations on the Chief Commissioner of the Office of the Social Security and Child Support Commissioners to provide, yearly, detailed statistics on the disposal of appeals and to arrange for the publication of key decisions. While it seems to be reasonable to expect such information to be provided, this Bill is not the right place to do so; its scope is not wide enough.
	The Government are already considering a number of recommendations made by the Select Committee on Social Security in another place and will consider carefully the provision of statistics on disposal of appeals before the commissioners. There is no reason at all why we should wish in any sense to make that information obscure, opaque or hard to get at.
	Following the recent report of that committee, an undertaking has already been given to arrange for the publication of the key decisions of commissioners. The Government will be responding to the committee's recommendations in the usual way. Given that these are quite technical amendments, and having given that explanation, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Buscombe: My Lords, I thank the Minister for her response to the amendments and to our concerns with regard to what we saw as only a minority of cases that would wish to go to court where a good chance of appeal existed. We are sorry that the Minister suggested that the courts would fail. If that was so, we would not have tabled the amendments. We cannot agree that the courts have failed to the extent she suggested; quite the contrary. However, we must agree to disagree on that point.
	With regard to Amendment No. 53, I thank the Minister for her explanation in relation to devolved powers to Scotland. That was extremely helpful. I am sure that those who have been in touch with us on that matter will be pleased to see that confirmed in Hansard.
	Finally, I hear what the noble Baroness says in relation to Amendments Nos. 54 and 55. It may be that in some ways this Bill is not the proper place to address those issues. But the points we raised tonight were of such importance that we felt it necessary to table the amendments and I thank her for her response. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 49 to 55 not moved.]
	Clause 13 [Information--offences]:

Baroness Buscombe: moved Amendment No. 56:
	Page 12, line 5, at end insert--
	("(4A) It is a defence for a person charged with an offence under subsection (3) that he has reasonably refused a scientific test to prove that the alleged parent is a parent of the child.").

Baroness Buscombe: My Lords, Amendment No. 56 is a probing amendment which we tabled fully to understand the implications of Clause 13. The effects of that clause may be quite far reaching in that the burden of proof upon the person charged with an offence under subsection (3)--that he has reasonably refused a scientific test--is onerous. Amendment No. 56 offers a lower burden of what is reasonable.
	Clause 13 will clearly make it tough for those not wishing to have a DNA test to prove that they have a reasonable excuse. That may be a good thing in principle. However, it raises a number of important questions which we hope that the Minister will be able to answer tonight. Will DNA testing, in practice, become routine? Do the Government intend or envisage that becoming the case? Who will pay for the test? We are concerned to ensure that a responsible approach attaches to the use of DNA testing; that DNA tests will be used properly by the Child Support Agency; and that the cost, when it is material to the outcome of a case, will be met by the CSA. We believe that, whatever their circumstances, it should not be assumed that fathers should meet the cost. I beg to move.

Baroness Hollis of Heigham: My Lords, Amendments Nos. 56 and 58 relate to the determination of paternity by means of scientific testing. Our reforms are intended to streamline the process of determining whether or not an alleged non-resident parent is in fact the parent of the child. The noble Baroness talks of routine testing. It may be worth pointing out that around 2,000 people go all the way to the courts to dispute parentage and in all but 100 cases they are found to be the parent of the child. I doubt therefore that the test will be routine.
	We seek to ensure that maintenance can be sorted out quickly and effectively. Clause 13 makes it an offence to fail to provide information or to give false information to the CSA. There is a fine of up to £1,000 on conviction. Amendment No. 56 seeks to provide that the criminal offence of failing to supply information in Clause 13 will not apply to an alleged parent who has reasonably refused to take a DNA test intended to establish parentage.
	Non-resident parents must meet their obligations to their children. These new criminal sanctions will ensure that children receive the financial support due to them and make sure that money flows. We intend, through Clause 15, to allow the CSA to presume that a man is the father of a child where he has refused to take a scientific test aimed at establishing parentage. That means that a refusal to take such a test will not normally stop the child support process. This will bring to an end a way of delaying the payment of child support that is prevalent in the current scheme.
	However, any man who is presumed to be the father of a child can apply to the courts for the presumption to be rebutted. That presumption will be applied only on a case-by-case basis and will not be automatic. In other words, if the Secretary of State feels that there is a reasonable reason, such as religious grounds, for an alleged parent to refuse to take a DNA test, he will not assume that the alleged parent is the child's father; instead, an application will be made to the courts for a declaration of parentage. In those circumstances the Secretary of State will not pursue information until such time as the courts have established parentage. Action under Clause 13 would not therefore be appropriate.
	Clause 13 was not intended to settle parentage disputes; that is for Clause 15. Clause 13 was designed to make it a criminal offence to fail to provide information or to give the CSA misleading information required to calculate or collect child support. If a non-resident parent refuses to take a DNA test, without good reason, he will be presumed to be the parent. In that respect, no further information will be required and there will be no prospect of prosecution. The Secretary of State will, however, then take action to ensure that the information needed to complete the maintenance calculation is provided. If it is not, criminal action may be taken. It is not right that parents are able to thwart the assessment of maintenance by failing to provide information. We believe that Clause 13 provides the correct approach.
	Amendment No. 58 would change the provisions of Section 20 of the Family Law Reform Act 1969, as amended by Clause 83, so as to make the Secretary of State for Social Security responsible for accrediting laboratories to carry out court-ordered tests to determine parentage, rather than the Lord Chancellor who is currently responsible for that area. The Government do not believe that that change would be appropriate. I do not know whether the noble Baroness would like me to go into why we should not change who is responsible for regulating laboratories. I shall duck that. If it is necessary, I shall write to the noble Baroness. I hope that, as a result of my explanation, that she will not move the amendment relating to the Lord Chancellor, because he has overall responsibility for the court system. In view of that, and the limits which exist to the Secretary of State's interests in the area, the Government believe that it would be appropriate for responsibility for the accreditation of laboratories under the new system to remain with the Lord Chancellor. In the circumstances, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Buscombe: My Lords, I thank the Minister for her response. As I said, this is a probing amendment. It is an important point and we were right to probe those questions. I take her point. We would appreciate her writing to us in more detail. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 14 [Inspectors]:

Baroness Buscombe: moved Amendment No. 57:
	Page 12, line 16, after ("inspector") insert ("shall receive full training and").

Baroness Buscombe: My Lords, I rise to speak to Amendment No. 57, which is again a probing amendment. It responds in a practical and, we feel, helpful way to what is already set out in the Explanatory Notes regarding the necessary expertise or qualifications required by an inspector properly to fulfil his or her function in what can often be difficult and delicate circumstances.
	Paragraph 152 of the Explanatory Notes states, inter alia:
	"Given the substantial training, which is required to make an inspector fully effective ...".
	We are asking for a reassurance that the necessary training of inspectors will be compulsory, given the nature of the task that they will have to undertake. Inspectors will regularly find themselves coping with the assessment of complex accounts, explaining their presence at a non-resident parent's place of work, a presence which often will only reluctantly be acceded to, and reassuring all concerned of the privacy of all the circumstances surrounding that particular case and the financial affairs which are examined in relation to it.
	In the circumstances, we do not understand why the Government have not placed on the face of the Bill a stipulation for compulsory training to demonstrate their intention to ensure that all the workings of the CSA are approached in a professional and objective manner. I beg to move.

Baroness Hollis of Heigham: My Lords, I am slightly puzzled. I realise that we were under pressure at Committee stage. However, if amendments are said to be probing amendments, it would perhaps be preferable if they were dealt with at Committee stage rather than at Report stage. Secondly, although I stand to be corrected, I do not recall any Bill--

Baroness Buscombe: My Lords, if I may interrupt the Minister, the only reason for raising it at Report stage is because time was not with us at Committee stage, and we therefore felt that we should not move it at that stage.

Baroness Hollis of Heigham: My Lords, I understood that that was the purpose of Committee stage. However, we can possibly take up this argument through the usual channels. It was the choice of the Members opposite.
	On the more substantive point, I am not aware that Bills usually specify the level of training for the staff employed by the Government. I can give assurances. I can give descriptions. But one does not put on the face of the Bill the fact that every CSA inspector will receive this amount of training, as the noble Baroness suggests. What would happen if one wanted to increase it, reduce it or change it? It is quite inappropriate for this kind of measure to be dealt with as an amendment on the face of the Bill.
	We know that it takes about six months for CSA staff to be fully trained and become properly effective. In addition, specialist roles, such as child support inspectors, require extra training focused on specific skills and knowledge. The officers are of at least executive officer grade. They have a wealth of interviewing experience behind them. Before they undertake their duties as inspectors of the CSA, they must attend appropriate courses, including a course on conducting interviews under caution and the Police and Criminal Evidence Act 1984. This course also deals with what is considered to be "obstruction" of inspectors in the course of their duties. They will also have had experience of dealing with potentially aggressive situations and a knowledge of interviewing and negotiating skills.
	We consider that the current training programme is sufficient for part-time inspectors. However, we are developing a full training needs analysis, which will be carried out as part of the preparation for and development of the new scheme. This analysis will take account of revised job design and more effective use of child support inspectors' powers and will ensure that an appropriate level of training is delivered in all cases. We are seeking to work in partnership with other departments, such as the Inland Revenue, in order to benefit from their experience and knowledge. We shall carry out training and we shall conduct a training needs analysis to ensure that our inspectors receive complete and appropriate training, because we obviously want the scheme to succeed.
	As a result, I hope that the noble Baroness will recognise that this amendment is not an appropriate matter for the face of the Bill. It is appropriate to the internal organisation and training patterns of an agency in terms of its operational deployment of staff. With that explanation, I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Buscombe: I thank the Minister for her response. I cannot agree with her that it is not appropriate to probe such an important subject at this stage. We have tabled this amendment to demonstrate the importance that we attach to the professionalism and the function which will have to be fulfilled by these inspectors. We are very glad that we have given the Minister an opportunity to respond and, therefore, reassure us that there will be proper training for what will amount to a function which will sometimes be difficult and will have to be handled in a delicate and firm way. On that basis, I beg to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 58 not moved.]
	Clause 16 [Disqualification from driving]:

Earl Russell: moved Amendment No. 59:
	Leave out Clause 16.

Earl Russell: My Lords, I do not expect the Minister to have any difficulty in understanding the purpose of this amendment. Whether or not she will like it any better for that is quite another question.
	The purpose of the amendment is to leave out of the Bill the clause which authorises a court, when people are reported to it for not paying child maintenance, to deprive them of their driving licence or deprive them of the right to apply for one. We believe that this is an inappropriate penalty. In terms of the Government's own objectives, it will prove to be counter-productive.
	When this Government came into office--and I have heard this quite often from the Minister--one of their big objectives was to rearrange the social security system to remove barriers to employment. This measure creates a barrier to employment. It does so, notwithstanding subsection (3) of the clause, which asks the court to investigate whether the person concerned needs a driving licence to earn a living. The court can only investigate whether that is so at the moment of investigation. But the Minister knows as well as I do that in the flexible labour market which we now have people cannot count on remaining for a long period of time in the same job. When they lose a job and are required by the actively seeking work rules to look for another, in many parts of the country they simply cannot do so unless they are able to drive. Therefore, they will not be able to work or pay their maintenance.
	The application of this clause will be an obstacle to the payment of maintenance. It will reduce the amount of maintenance paid because it cannot be paid without earnings. It will be a case of killing the gander that lays the golden eggs. This measure defeats, first, the principal object of the Government's own social security policy and, secondly, the principal object of this Bill. In terms of shooting oneself in the foot, I think that is a notable right and left.
	It is not, of course, just a matter of work. For anyone living in a rural area, and for a good many people who now live in suburban areas or who need to make radial journeys across large towns, the lack of a car is a very ysignificant obstacle to a lot of the other daily necessities of living: for example, shopping, taking children to school--and, since this Bill involves provision for shared care, that may well involve those children whose maintenance we are discussing--visits to the dentist, or, if I may say so, attendance at Labour Party meetings, which, if I read today's Guardian correctly, is not as easy to bring about as it used to be.
	About two weeks ago, the Chancellor of the Exchequer floated the possibility of using the employment and social security system to provide unemployed people involved in job search with the use of a car during the period of their search. That was a very interesting suggestion. It suggests that the Chancellor of the Exchequer recognises the case that I have argued for some time, namely, that there are numerous areas of this country in which one cannot actively seek work unless one can drive, but it suggests a very limited consultation between the Chancellor of the Exchequer and those involved in the drafting of this Bill. We usually hear quite the opposite story--that the Chancellor of the Exchequer is too much involved in making social security policies. Perhaps on this issue he has been too little involved. It does not sound to me like particularly joined-up government.
	There are also quite considerable problems about the notion of read across from one area of penalty to another. I am sure that the Minister will have the read the warnings about this problem on the subject of Sure Start in the latest report of the Social Security Advisory Committee. I do not have it with me but, as I have quoted from it previously, I do not think that the noble Baroness needs to be reminded of it. When we get into the area of read across, we must ask: why this read across and not any other? Why is this the only offence that will lead to the deprivation of a driving licence? Indeed, is it the only offence that will carry such a penalty, or will people be deprived of driving licences for any sort of behaviour of which the Minister--the Secretary of State for the time being--does not approve?
	Why only driving licences? Would it not be just as logical to deprive people of, say, the right to play cricket? The problem of which read across is appropriate applies both ways. Why should it not apply to cycling or, indeed, to walking? It leaves me with the words of Belloc:
	"Is it true? It is not true.
	If it were, it would not do
	For people such as me and you,
	Who pretty nearly all day long
	Are doing something rather wrong".
	If we have this sort of read across, we shall have all sorts of apparently illogical restrictions being put in many inappropriate places.
	We heard a number of government arguments--

Lord Higgins: My Lords, I apologise for interrupting the noble Earl, but there is rather a nasty symmetry about what is now happening. First, we have a penalty affecting the Department of Social Security that has nothing to do with it; and, secondly, the deprivation of social security benefits is being considered in other areas that have nothing to do with the department.

Earl Russell: My Lords, I am most grateful to the noble Lord for raising that point, which is entirely valid.
	I turn now to some of the Government's arguments. To begin with, they say, "All they need to do is to pay". If I were not a generous person, I would let them go ahead and say it--because every time they did, they would put extra votes into my lobby. But that is the argument of the Mafia godfather, "You'll comply if you know what is good for your health"--

Baroness Hollis of Heigham: No, my Lords, "You will comply if you know what's good for your children".

Earl Russell: My Lords, it was also very much the argument of inquisitors in the days of religious persecution. They, too, put upon it the gloss that the Minister used--

Baroness Hollis of Heigham: My Lords, the noble Earl, Lord Russell, ought to withdraw that remark. We are not talking about examining people's souls or about putting fires under their consciences in order to bring them to one form of faith rather than another; we are talking about ensuring that children in this country receive the maintenance to which they are entitled--a million of them do not. If fathers can but will not pay, we shall ensure that we have the penalties available to make sure that they do, without sending them to prison which, in turn, may damage the child.

Earl Russell: My Lords, in some cultures and religions that are represented in this country, the point I mentioned earlier about the comparative respect for elderly relatives and for children is a matter of faith. I did not intend to argue that the Minister was actually a persecutor. If I made any such innuendo, I withdraw it. However, in turn, the Minister should allow that there may be consciences involved: people may occasionally believe that they have reason for doing something other than what the Minister requires of them.

Baroness Hollis of Heigham: My Lords, can the noble Earl give me an example of any occasion where it would be in someone's conscience that he should not support his child? I can believe that people may feel that they should also support an elderly parent, but are we saying that someone's entire income would be taken up in supporting a child and an elderly parent? No. We are saying only that 15 per cent, 20 per cent or 25 per cent will go on the children, leaving ample to support an elderly parent and to meet any of the other moral obligations illustrated by the noble Earl.

Earl Russell: My Lords, until the Government take action on the report of the Royal Commission on long-term care, I believe that I can make those comments. The costs of keeping an elderly relative in a residential home may be considerable. Yes, I can imagine people saying that, in conscience, they cannot turn their parents out of a place where they are receiving care in order to provide a better standard of maintenance for their children. The Minister may say that that is wrong; but she cannot tell me that no one will ever have a conscience to that effect, because many people do.

Baroness Hollis of Heigham: My Lords, this is not really appropriate for a Report stage. None the less, the noble Earl is not describing either fairly or decently the present system for supporting people in residential care. If an elderly person has no resources, he or she will be supported through payments from the state and not necessarily from their relatives. The noble Earl may be concerned that the relatives may seek to hang on to the house and, therefore, prefer to pay the cost of residential care. In that case, they would be trading current revenue against future capital. That is their choice.

Earl Russell: My Lords, we must leave the House to judge between us on the matter.
	I shall not deal with the Minister's other arguments at any great length. However, she talked about a penalty like tagging disgracing the parent before the child and argued that the loss of a driving licence would not do so. The noble Baroness does not seem to understand that, for many children, the chief purpose of a father is to act as a magic carpet. That should not perhaps be so, but it often is in practice. I believe that this penalty will disgrace the father before the children a great deal more than a penalty like tagging.
	The Minister also argued that this penalty would produce increased compliance. She used evidence from the United States, with which the noble Lord, Lord Higgins, dealt extremely effectively. In the United States, you cannot move or even do your weekly shopping without a driving licence. It is not like that in this country. As the noble Lord, Lord Higgins, also said, it is much more likely that those affected will drive without insurance. Therefore, if they have a crash, the penalties in this clause might fall upon innocent people who just happened to be travelling the other way. I declare an interest in the hope that I shall not be one of them. I beg to move.

Lord Higgins: My Lords, by a curious coincidence, the closing remarks of the noble Earl are relevant to my opening remarks. If one believes that one may have an interest that is relevant to a debate, I have always regarded it as paramount that one should declare it. During the Committee stage, I unexpectedly received a brief from the RAC Foundation, which made exactly the same points that I made on Second Reading regarding this matter. I thought that I might have some indirect connection with the foundation and, therefore, rightly drew it to the attention of noble Lords. However, it turns out that I have absolutely no connection with the foundation, which, I understand, is an independent charitable body. So I suppose that I must "undeclare" my interest, if that is possible. I apologise for detaining the House on that point, but it is curious that the noble Earl declared an interest just before my opening remarks.
	The issue now before us is an important one. The noble Earl outlined many of the relevant arguments. I fear that the problem of the disconnected penalty is becoming increasingly fashionable. There is no connection between the offence--namely, not paying one's child support, which we all agree should be done--and the penalty of withdrawing someone's driving licence. If anything, as the noble Earl pointed out, such a penalty may prove to be counter productive in as much as the withdrawal of the licence may make it more difficult for the individual concerned to produce the resources required. However, I accept the provision in the Bill which states that the court may consider, and take into account, whether withdrawing the licence would result in the person losing his livelihood. Indeed, the noble Earl dealt with that aspect.
	A further issue arose in Committee. The noble Baroness, who is always preoccupied with the record of the previous government, pointed out that the Crime (Sentences) Act 1997 included such a provision. She also mentioned that it proposed pilot schemes, but did not tell us the results. I make one major point in that context. The proposal in that legislation related to criminals; it did not relate to those who have not paid their child allowance. While we may deplore that fact, those people are not--at any rate for the moment--defined as criminals. Therefore, there is a big difference between those two sets of people.
	That Act was passed under the previous government. A Home Office press statement by the present Government was published on 1st January 1998 announcing its implementation. This made the point I have made; namely, that criminals could be deprived of their driving licences. It also mentioned pilot studies. In Committee, I asked the noble Baroness about the results of the pilot studies but she was unable to give me an answer. Subsequent research has failed to produce an answer but I am glad to note that the Minister nods and therefore it appears that at least the Government have that information. No one else appears to have it and the matter seems to be shrouded in secrecy. It would be interesting to have that information in the context of this debate.
	People who do not pay their child maintenance and have their driving licence withdrawn--even though they may not be criminals--might then drive while uninsured. That matter has serious consequences and is a relevant consideration.
	The Government appear to have been inspired by experience overseas, and in particular by that of Texas. We carried out a quick survey. However, I admit that it involved just one person! One does not have that many Texan friends! The results were illuminating. When asked how life would be in Texas without a driving licence, the answer was that it would be tough. We asked whether people in Texas had to carry their licence all the time when driving. The answer was "Yes". We asked whether a penalty would be imposed on someone who was stopped while driving and did not have a licence on them. We were told that one was fined in those circumstances. We asked whether the licence served as an ID card. The answer was "Yes". Driving licences there have one's picture and can be used to cash cheques and to perform many other transactions. That is not the case in this country. I shall not ask how many noble Lords have been asked to show their driving licences recently. I see that one hand has gone up. Driving licences are normally asked for in this country only if one has committed some traffic offence.

Baroness Crawley: My Lords, I thank the noble Lord for giving way. I was asked to show my driving licence because my car was stolen.

Lord Higgins: My Lords, I commiserate with the noble Baroness. However, the inconvenience of being deprived of a driving licence is nothing like as severe for someone in this country as it would be for someone in Texas.

Baroness Hollis of Heigham: My Lords, I am now baffled by this argument, which was also deployed by the noble Earl, Lord Russell. Is the noble Lord saying that the Government should not deprive certain people of their driving licence because that would not cause them the same degree of inconvenience as it would for people in the States? Is he saying that the loss of a driving licence is such a severe penalty for people in the States that it acts as an effective deterrent, whereas in this country it would be too mild a deterrent to be included in the shopping list of penalties given that alternative forms of transport such as buses are available and people do not have to use their driving licences as ID cards? Is the thrust of the noble Lord's argument that we should not use this deterrent as it is not tough enough for people in this country? Which argument is the noble Lord deploying?

Earl Ferrers: My Lords, I hope that I may interrupt this jolly conversation between the two sides of the House. If I am correct, we are at Report stage. I believe that on the previous amendment the noble Baroness had about five chips at the cherry. We ought to follow the rule that we speak only once.

Baroness Hollis of Heigham: My Lords, I do not believe that the noble Earl was present for the rest of the debate.

Lord Higgins: My Lords, the noble Earl has far more experience of the proceedings of the House than I.
	I say to the noble Baroness that, on the whole, we think that this proposal is pretty silly and is not likely to be effective. We have mentioned the danger that people whose driving licences are withdrawn may drive while uninsured. It is not at all clear whether the Government regard this as a lesser penalty. Ministers have said that this penalty is less severe than some others. On the other hand, it was announced with a great fanfare as if it was the flagship proposal of the Bill. That no longer appears to be the case.
	Other bodies have expressed concern at the proposal. The Law Society of Scotland states:
	"the Society does question the proportionality of the disqualification provisions which appear in Clause 16(3) which provide that in the event that the Court is of the opinion that there has been wilful refusal or culpable neglect to pay, it may order the non-payer to be disqualified 'for such period specified in the order but not exceeding two years' ... from holding ... a driving licence.
	The proportionality of this disqualification period may be out of kilter with current road traffic law. For serious contraventions of the Road Traffic Act 1988, such as Section 5(1)(a) (driving whilst under the influence of alcohol), the penalty can be disqualification for a period of only 12 months and in practice, the disqualifying period will only exceed this if there are aggregating factors".
	The noble Baroness asked whether this was a severe penalty. It seems to be regarded as more severe than the penalty imposed for driving while under the influence of alcohol. We need to consider whether the proportionality of the penalty is appropriate.
	As I say, we on this side of the House regard the proposal as silly in some respects. However, it has potentially dangerous consequences. In our view, it is not an appropriate penalty to impose in this area. That does not mean that we are not anxious to ensure that those who ought to pay child maintenance do so. We have generally welcomed the provisions of the Bill. However, we do not think that this proposal is appropriate. If the noble Earl seeks the opinion of the House, I believe that we on this side ought to support him.

Baroness Massey of Darwen: My Lords, I have read the Committee stage debate on this issue. Having listened carefully to the comments of the noble Earl, Lord Russell, and of the noble Lord, Lord Higgins, I ask myself what sanctions we should apply, how we should apply them, and how we can support civil liberties while at the same time encouraging civil responsibilities.
	Those of us who condemned the behaviour of English soccer hooligans may have wondered how we could have prevented that behaviour from happening in the first place. I should have thought that tough deterrents could have prevented it. I refer, for example, to the withdrawal of passports. I regard the threat to withdraw driving licences as a deterrent. The lack of a car can sometimes constitute an obstacle. However, that obstacle can be avoided by complying with certain rules. I suspect that more people drive than play cricket. They certainly do not play cricket in Texas. We should remember that the courts can take into account whether someone needs a driving licence to enable him or her to earn a living.
	Only 66 per cent of the maintenance that is due is paid. What can we do to remedy that situation? What can we do to support children? What can we do to tackle child poverty? The payment of maintenance forms part of the solution. If the threat of removing a driving licence results in more people paying maintenance, surely that is a valid approach.

Lord Mackenzie of Framwellgate: My Lords, I declare an interest as a patron of the charity, Kidscape. A prime consideration of that charity is the welfare of children.
	I oppose the amendment. Recently the Chief Rabbi, Dr Jonathan Sacks, wrote that most people accept the values of honesty, of not committing crimes, of parental responsibility and fidelity. He wrote that people's general instinct is not to harm neighbours, partners or children. The noble Lord, Lord Higgins, and the noble Earl, Lord Russell, said that if the clause was retained, people would break the law through driving without insurance. If we applied that argument across the board we would not make it illegal to commit burglary because people might well commit burglary and break the law. It is a nonsense. There is, of course, the Motor Insurance Bureau, which looks after the interests of people injured by people driving without insurance. It is a non-argument. One has only to stand in a pub and listen to people talking about the football hooligans in Belgium to understand that, generally speaking, we still have decent values in this country.
	As a former police officer, I was often accused of being perhaps a little hard on offenders; that I was too quick to recommend custodial measures without first trying other alternatives such as community sentences. Perhaps that is true. It has to be said that the record of prison is not good, but neither is the record of other forms of non-custodial treatment.
	In my former life I always tried to achieve justice for the victim of crime. That does not always mean imprisoning the offender; it could mean paying compensation, or even a restorative justice measure such as meeting the victim and apologising for the offence. In other words, we seek to achieve the best outcome for the person wronged. That is the way we should approach this measure.
	I spent many hours persuading people who were acting anti-socially of the error of their ways. I have used humour, threats, promises and, yes, deception on occasions--although I will not go into details--to deal with the myriad of situations with which a police officer is confronted. I was always told--and, indeed, always practised--never bark unless you are prepared to bite. In other words, if you threaten to arrest someone, always be prepared to carry it out in the final analysis, and have the lawful powers to do so.
	The law should use every means at its disposal to ensure that decisions made by the law are enforced. It is rather like golf; we should have a range of clubs at our disposal, even if we do not use them all. I know the salutary effect that the threat of losing one's driving licence has on the vast majority of drivers. It is very important; it makes them think twice before they continue a course of conduct which they know will attract disqualification. In other words, it concentrates the mind.
	If the threat of being disqualified from driving corrects driving behaviour, why should we not use it to correct social behaviour? We are talking simply of another club being used which is available to the court. I am sure the fact that such a measure is available will cause many absent parents to stand up to their social responsibilities. As an alternative to imprisonment it is a perfectly legitimate non-custodial sanction.
	I remember that a few years ago the former Home Secretary, Michael Howard, used this idea as a sanction against criminal offenders under the Crime (Sentences) Act 1997--and why not if it deterred offenders and reduced the number of victims of crime? It seems to me to be perfectly legitimate.
	Magistrates do what magistrates do best--that is, they apply common sense. Clearly they will not impose a ban if it means that a person's job would be affected. The ideal would be for such driving bans not to be needed at all. It is to be hoped that compliance will be achieved by simply having the ban available and the non-compliant person realising that.
	This is a last resort measure. The public of this country are fed up to the back teeth with people evading their social responsibilities. It is a sanction that has worked well in other jurisdictions and we should learn from that. There is very little logic in saying that driving bans should be used only to promote safer driving. It is an effective sanction; let us use it to achieve compliance. The beneficiaries will be justice and, in the long term, children.

Baroness Hollis of Heigham: My Lords, Amendment No. 59 relates to the power to introduce a new civil penalty that will enable an order to be made by magistrates disqualifying a non-resident parent from holding or obtaining a driving licence as an alternative to committal proceedings. I am aware--if I was not aware before, it has been made clear to me today--that the penalty of disqualification from driving for failure to pay child support causes concern to some noble Lords on the Opposition Benches.
	Clause 16 will enable an order to be made by magistrates disqualifying a non-resident parent from holding or obtaining a driving licence. As my noble friend Lord Mackenzie said, it will exist partly as an alternative to committal proceedings--that is, to imprisoning the offending person. It will be imposed--like imprisonment--very much as a last resort on those parents who have resisted every attempt over some period of time to get them to meet their responsibilities to their children. At this stage, the non-resident parent will have had every right to dispute his liability or to appeal it to an independent tribunal. The money owing will be money legally determined on the basis of child support legislation.
	Our provisions require the courts--not the CSA--to consider all the circumstances of the case when deciding whether disqualification from driving or imprisonment is the appropriate penalty. To help with this decision it is only right that the court should inquire into whether the licence is needed to earn a living, as well as into the non-resident parent's financial circumstances. It does not mean that where the liable person needs a driving licence to earn a living the licence can never be removed, but it is one of the circumstances that the court must take into account--and I am sure will take into account--before imposing the penalty. So the court will have all the information before it. It will know that the person has wilfully and consistently refused to pay child maintenance, and that the CSA is now bringing that matter to court.
	At the moment the courts have two broad sanctions--a fine, which usually fails to bite on someone failing to pay money, and imprisonment. To those sanctions we are adding one of removal of a driving licence. The courts will be able to impose a disqualification for a period of anything up to two years.
	We are also proposing that the order disqualifying a non-resident parent from holding or obtaining a driving licence can be lifted or amended when the debt has either been cleared in full or a specified part payment has been made. So where a non-resident parent makes a genuine effort to pay off the debt, consideration will be given to giving him his licence back; it will be for the courts to decide. In other words, if the non-resident parent wishes to keep his driving licence, he pays for the support of his children; if, having lost his driving licence because he had failed to support his children, he then starts paying for his children, he will get his licence back.
	Noble Lords on the Opposition Benches should make up their minds whether they object to this measure because it is too effective--which is the position of the noble Earl, Lord Russell--or it is so ineffective as to be silly--which is the word used by the noble Lord, Lord Higgins--compared to that of Texas.
	We know that when somebody fails to pay it is right that society should use such sanctions as it can to ensure that fathers support their children. If they will not pay the money and not pay a fine, if they will not respond to a garnishee or a distraint order, the alternative facing the magistrates is imprisonment. We are offering the magistrates an alternative and lesser penalty than imprisonment, and one which is less likely to bite on the child.
	The noble Earl, Lord Russell, asked how will this person be able to earn a living; how will he be able to do this; how will he be able to do that? The answer is quite simple: he pays his child maintenance and the situation does not arise. All that man has to do--I am assuming it to be a man for these purposes, but it could be a parent of either gender if it is the non-resident parent--to keep his licence is to pay the maintenance. Once that maintenance is paid, the licence can be restored. If a period of disqualification ensures that maintenance is paid, then the scheme will have worked.
	Under the current collection enforcement arrangements, the CSA will have offered the non-resident parent every opportunity to pay. He will have had the choice of a variety of payment methods, including direct debit, standing order or a deduction from earnings. If talking to him and trying to arrange alternative methods of payment has failed, we go on to the next stage--which is to go for a liability order, and this can be followed up with bailiff action or garnishee orders. Even at that stage it is not too late for the non-resident parent to become a regular payer. He can stop enforcement action at any time by making adequate payment arrangements.
	However, those non-resident parents who can pay but wilfully--I stress, wilfully--deliberately, knowingly and repeatedly refuse to support their children, but are happy for other fathers to do so, will now face an application by the CSA to the courts for the most severe sanction. In the past that meant committal to prison. The removal of the driving licence--this is the third stage--gives the courts an alternative final penalty, one that may allow the non-resident to continue working and so pay the maintenance that is due. It will be for the courts to decide whether the non-resident parent is deliberately refusing or neglecting to pay. If the magistrates decide that the penalty is appropriate, they will be able to consider all the relevant circumstances to ascertain whether that penalty is the right one.
	I shall not trouble the House with the statistics from Norfolk and Manchester. I wrote to the noble Lord, Lord Higgins, and the noble Earl, Lord Russell, about them. However, those pilots revealed that out of a total of 84,000 fines issued under the pilot scheme, 155 fine defaulters received driving disqualification: 12 in Norfolk and 143 in Manchester. The pilot schemes--introduced by the noble Baroness, Lady Blatch--showed that, where driving licence disqualification was used selectively, it appeared to be extremely effective.
	At the end of the day, we believe that fathers should support their children. Children are entitled to that support. As I have said, every opportunity will be given to non-resident parents to enable them to make arrangements to pay. That is the kind of acceptable behaviour that we want to see. If they do not do so, they must be encouraged and persuaded. They have to be persuaded. Their children are entitled to support. Furthermore, that support should not be dumped on to other men and other fathers. If that means that the sanction of the loss of a driving licence as an alternative to imprisonment needs to be used, and as determined by magistrates rather than the CSA, that appears to the Government to be appropriate.
	We know that it will have a severe effect, in particular on those living in rural areas. That is why we have provided that magistrates can take such considerations--in particular the ability to continue earning a living--into account. However, no non-resident parent, whether he lives in a town or in the countryside, needs to lose his driving licence. It is up to him. If he chooses to support his child--as he should--he does not need to lose his licence. If the licence is removed but the non-resident parent then starts to support his child, the licence will be restored.
	However, to argue that we should knowingly not introduce a penalty which has been used effectively in the United States and which falls short of committal to prison--where the parent most certainly will not have any capacity to earn a living to support his child--is wrong. We should not knowingly put a non-resident parent's right to drive a car ahead of a child's right to support from his father. I regard that as an improper moral position.
	As a result, if this amendment is pushed to a vote, I hope that noble Lords will support the Government by deciding that children must come first and the right to drive a car must come second. If a non-resident parent supports his children, then of course he may enjoy his right to hold a driving licence. It will not be under threat. I hope that your Lordships will not support this amendment.

Noble Lords: Hear, hear!

Earl Russell: My Lords, before I reply, I should like to express my sympathy for the noble Baroness, Lady Crawley, on the theft of her car. I hope that she has recovered from the experience.
	Needless to say, the cleverest argument against this amendment was put forward by the Minister. What else would one expect? I refer to the argument about whether the sanction will be too effective or ineffective. In her academic capacity, the Minister will be familiar with the procedure of ducking witches. They used to throw the witch into the water. The innocent witch was received by the holy element, and thus sank. The guilty witch was not received by the water, and thus floated. That is what we believe will happen here. The procedure will be draconian in its effectiveness against the honest and will be totally ineffective against the dishonest. We think that that is the wrong way round. The honest, who will not be prepared to drive uninsured, will suffer severely, while the dishonest, who will drive uninsured, will cause a good deal of damage.
	After the exchanges that have already taken place, I was a little surprised to note that the Minister saw fit once again to repeat the argument: "All he has to do is to comply". I do not wish to visit painful territory, but perhaps the Minister will agree that that threat--for that is what it is--can be repeated in support of any requirement, however justified or unjustified. The Minister said that: "This is what will happen if he does not support his child as he should". We agree that he should, but that he should do so as required by this Bill. That is quite another proposition.
	By no means everyone in this country believes the matter to be morally, politically, practically, philosophically or in any other way right. The Minister repeated, over and over again, the words, "wilful refusal". I have reminded the Minister in the past of the problems we encountered with the poll tax; namely, "can't pay" or "won't pay". The Minister refuses to believe that there may be anyone caught under this legislation who might be genuinely unable to pay. That, I believe, demonstrates a great simplicity of mind.
	The noble Lord, Lord Mackenzie of Framwellgate, said that the court uses every means at its disposal. Yes, but it begs the question which is before us now: whether these means should be at the disposal of the courts? I think it is important to keep in the minds of all those who have anything whatever to do with motor vehicles that the qualification for driving a motor vehicle is that of being safe while one handles it. As soon as we produce the sanction of disqualification for any other reason whatever, we will be diluting that principle. To me, the principle is important.
	I recall that, when we discussed this matter in Committee, the noble Lord, Lord Stoddart of Swindon, said that he would call a Division even if he had to do so entirely on his own. However, it appears that the noble Lord is not in a position to do that. Perhaps, as an act of generosity, I should do it for him. I shall not ask for a show of hands; I shall ask for a show of feet. I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 59) shall be agreed to?
	Their Lordships divided: Contents, 66; Not-Contents, 104.

Resolved in the negative, and amendment disagreed to accordingly.

Baroness Amos: My Lords, I beg to move that further consideration on Report be now adjourned. Perhaps I may suggest that the Report stage should begin again not before 8.46 p.m.

Moved accordingly, and, on Question, Motion agreed to.

Mutual Companies

Lord Faulkner of Worcester: rose to ask Her Majesty's Government what they consider to be the role of strong mutual companies in promoting a healthy and competitive market in financial services.
	My Lords, I start by thanking those of your Lordships who have put their names down to speak in this short debate, which has the virtue of being remarkably timely because the deadline for postal votes for the Standard Life demutualisation proposals is little more than four hours away. I should declare an interest at the outset as a Standard Life policy holder.
	The purpose of my Unstarred Question is to make the case for consumer choice and competition in the provision of financial services. In preparing for tonight, I had meetings with the chief executives of Standard Life and the Nationwide Building Society. While there are obvious differences between building societies and insurance companies, they share a common philosophy. At the top of the list is their personal commitment to their members. Both chief executives made the point that they can devote their working day to thinking exclusively about their customers and the long-term prospects for their companies.
	The chief executive of a financial PLC, on the other hand, has primarily to consider his shareholders and will be expected to spend a lot of time in the City talking to analysts, financial institutions and others who can influence the share price. There is nothing wrong with that, but surely it is sensible for both kinds of company to co-exist and for customers to have a choice, as indeed my noble friend Lord McIntosh of Haringey indicated in answer to a question from the noble Lord, Lord Higgins, on 19th April, when he said that,
	"a variety of different kinds of governance in the insurance industry is a good thing".
	My noble friend went on to say:
	"Therefore there is a place for both mutual companies and for shareholder-owned companies".--[Official Report, 19/4/00; col. 703.]
	I entirely agree. But I believe that more needs to be done to protect the mutuals from the unwelcome attention of carpet-bagging predators of the kind that currently circle round Standard Life and continue to stalk other mutual prey, including two recent goes at the Nationwide.
	Let us remind ourselves about some of the advantages that mutual companies enjoy. For one thing, profit is not the first item on their agenda. They do not have to maximise short-term profits for the benefit of outside shareholders because they simply do not have any. On the other hand, most of the building societies which have converted to plcs pay out more than one-third of their profits in dividends to shareholders, who are made up largely of city corporations, not individuals or former members of a society.
	Instead of paying dividends, the profits made by a mutual are put back into the organisation to benefit its members through interest rates which are higher for savers and lower for borrowers and through better services, such as lower charges, free ATM machines, the sustaining of branch networks and so on. A good way to judge the value that a customer gets from a financial organisation is to look at the difference between the interest rate that he receives for his savings and the interest rate that he pays on his mortgage. The narrower the margin between the two the better the deal the customer gets. Traditional banks have margins of about 3 per cent or higher and converted institutions operate on margins above 2 per cent, but for many building societies the margins are less than 1.5 per cent.
	Plcs must charge customers for the use of shareholders' capital. Demutualisation gives ownership of the capital to the present generation of customers. They take for themselves the right to charge future customers for the use of capital which has been passed to them as a benefit in trust. By contrast, the board of a mutual company has a responsibility, as the Minister said in answer to a supplementary question from me on the same day in April,
	"to a number of different stakeholders, including current policy holders, the employees and prospective policy holders".
	Given management of equal quality, mutuals should have an advantage over plcs in terms of superior investment returns and other financial service products. Certainly, in the case of Nationwide and Standard Life that is undoubtedly the case. Nationwide claims--I have no reason to disbelieve it--that over the past three years a customer with a £50,000 mortgage and £5,000 in an instant access branch-based savings account would be better off with it than any of the five leading former building societies which converted to plcs by amounts ranging from £739, compared with the Halifax, to £1,081, compared with Northern Rock.
	There are similarly interesting comparisons in the returns on life and pension policies. The magazine Money Management has calculated that payouts by mutuals have been around 4 per cent higher on average for policies maturing over the past 15 years. Compared with the average plc, Standard Life's payout record is 9 per cent better. The record is also better when it comes to endowments and pension payouts.
	As Professor David Wilkie said in an article in the Daily Telegraph on 3rd June,
	"Demutualisation is trading future security for the quick buck".
	In effect it is future pensioners who pay for the dividends which go to shareholders.
	In every debate about demutualisation much is made in the media about the size of possible windfalls for policy holders. That is particularly so in the current battle for Standard Life. Mr Fred Woollard, who has emerged from his home in Monaco as the leader of the pro-plc campaign, claims that flotation of Standard Life would value it at between £12 and £15 billion. He says that that would produce average payouts of between £5,000 and £6,300 for qualifying with-profits policy holders. On the other hand, the company says that, with a valuation of £12 billion, 50 per cent of policy holders would get less than £2,500, 30 per cent would get between £2,500 and £6,000 and only 20 per cent would get more than £6,000. Undoubtedly, one of those would be Mr Woollard himself. He admits to having bought up enough second-hand endowment policies to put himself in the frame for a payout of £150,000.
	That is very nice for Mr Woollard, but it is important to recognise the difference between an average and a typical windfall. It is like a lottery prize fund of, say, £5 million in which one winner gets £4 million and 100,000 get just £10. Therefore, the average prize is just under £50 but £10 is the typical prize.
	An interesting comment on Mr Woollard is made by a Standard Life employee, Mr Garry Morrison, in the company's document on demutualisation. Mr Morrison points out that he has worked for Standard Life for more than 20 years,
	"helping to build a company that has delivered significant benefits to members. Unlike Mr Woollard, who by his own admission, has worked on Standard Life for at least a year--which says it all".
	Ninety per cent of all staff polled recently by MORI were against demutualisation, despite the promise of financial benefits made by Mr Woollard's action group.
	The talk of "windfalls" is rather confusing. In this context a windfall is simply the conversion of a long-term benefit into a short-term one. What do windfalls do? They drop to the ground, bruised and often unripe. One may get the fruit earlier but it would be much better, and more tasty, if it was left on the tree to mature properly.
	The Treasury Select Committee in another place carried out an examination of demutualisation in the previous Session. Its report largely supported mutuals and employed a number of the arguments that I have adduced tonight. The committee wanted to make it harder for carpet-baggers and to increase safeguards, particularly so far as concerns the 1986 Act. One of its recommendations--that, for future members, windfalls would be assigned to charity--has been followed by a number of societies. That has largely discouraged the carpet-baggers, who are interested only in short-term gains.
	But there remains the problem that mutuals can face the disruptive and costly challenges of contested elections for members of boards year after year. It is, as Nationwide says,
	"the equivalent of a government having to face a general election every year".
	While I understand that the Government are unwilling to find time for primary legislation to implement those of the Select Committee's recommendations with which they agree, I hope that they will bear in mind the need to reduce the uncertainty and disruption caused by potential carpet-baggers.
	Finally, can the Minister inform the House whether the Treasury is yet in a position to respond to the letter which Mr Davis of the Nationwide sent to the Economic Secretary on 26th May about the relative unfairness of the new all- employee share scheme? This centres on the point that mutuals are not able to take advantage of the share-based tax incentive schemes for their staff which featured so much in the Chancellor's Budget. It puts them at a disadvantage compared with their competitors. Clearly, it is unfair and anti-competitive because plcs enjoy tax breaks which are not available to mutuals. A positive response to these points would be seen as an indication of a real commitment by the Government to ensure fair competition between mutuals and plcs. That is what I hope to hear reiterated by my noble friend when he replies to the debate.

Lord Shutt of Greetland: My Lords, I am grateful to the noble Lord, Lord Faulkner of Worcester, for introducing this debate. I wonder whether it is 15 years too late. Several horses have bolted and few are left in the stable. The Trustee Savings Bank Act 1985 was perhaps the start when that cousin of the building societies was allowed to float. The Building Societies Act 1986 has seen the shedding of the mutuality of Abbey National, the Cheltenham & Gloucester, Halifax/Leeds Permanent, Woolwich, Alliance & Leicester, National & Provincial, Bristol & West, Northern Rock and Birmingham Midshires building societies. Fifteen of the top building societies in 1984, amounting to 70 per cent by asset value, have now demutualised. If Bradford & Bingley, which is in the wings, also does so, that figure will increase to 73 per cent.
	We have seen the same process in insurance with Norwich Union, Scottish Amicable, Clerical Medical & General, and Scottish Widows, with Friends Provident in the wings. We have seen it happen to the AA and the RAC. We have witnessed the decimation of the mutual family.
	This matter has been of some concern to me. Four years ago I arranged for Demos to publish a little booklet entitled Building Society Bounty: The Case for Member Philanthropy which hit on the notion of inter-generational equity.
	The situation as regards mutuals has been rather like the parlour game of pass-the-parcel. When the music stops and the windfall drops, it is those of this generation who benefit. There is a moral case for charitable foundations to be created to honour those mutual years and to look carefully at those communities where the mutuals have been based. There is a further opportunity later: there are often substantial unclaimed or orphan shares.
	What do many mutuals have in common? One of the major features of mutuals is their non-London base. Standard Life is based in Edinburgh. Unusually in this case, the directors want to retain mutuality; and I wish them well. Most directors' leadership has been to move away from mutuality. I am delighted that those directors are pro-mutuality. One of the great fears is that demutualisation means centralisation, if not in the early stages then perhaps later.
	It was announced on Tuesday of this week that 250 to 300 high quality jobs will be lost with the Halifax. I regret that I have to declare an interest: my daughter is affected. That announcement came after I had put down my name to speak in this debate. It is interesting to note that although it was the main story in the Halifax Evening Courier, there was not a mention of it in the London Financial Times.
	Why has there been this rush to demutualise? One of the problems has been that the relationship towards members has not been understood properly. Perhaps they have been considered as just customers. What does membership mean? The remaining mutuals may have a chance, but they need to cherish their members and to give meaning and purpose to membership. Within the past few days we hear that water companies are thinking of becoming mutuals. Does that indicate that mutuals are all right if there is no money in them? We have also seen the new mutuals, the credit unions.
	I look forward to the Minister's response. I recognise the general case for the mutual: that there are no dividends to be paid out; the mutuals are not worrying every day about the share price. However, where mutuality is to cease--there may be good reason in some circumstances--will the Government encourage the creation of a charitable foundation at the time of demutualisation? Will they seriously consider "gifting" orphan shares? Will the noble Lord indicate the Government's view on regional identity in financial services provision and the role of mutuals in sustaining a regional financial presence? In particular, do the Government wish to encourage the cherishing of the members?

Lord Haskel: My Lords, I congratulate my noble friend Lord Faulkner on his timing. It really is split second stuff! I support what he says. Mutual companies used to dominate the building society and insurance businesses. The purpose of mutuality was to enable low earners to own their homes and to enjoy the security of insurance. Mutual companies were more concerned with the less affluent and, indeed, the rich were charged more.
	The purpose was not profit, as my noble friend pointed out. Mutuals had a social purpose. Indeed, a well-run mutual offered a better deal than a well-run shareholder company because the mutual did not pay dividends. However, along came an era of short-term market economics and there was significant change. Conversions took place and reserves built up over many years which really belonged to the past members who were no longer around to claim them. They were shared out among the current members. Plcs gave a better deal to the bigger customers and their justification of the "trickle down" effect has not taken place.
	Why is demutualisation a matter for the Government? Is it not simply a matter of market forces in the private sector? I do not think so. There are occasions when the task of government is to promote the general good over the private interests of individuals or groups. In recent years, leaving decisions to the market has been a manifestation of that. However, there are occasions when market failures need to be put right. The markets in water and electricity are recent examples where the Government have had to become involved.
	The gradual disappearance of mutuals is, I believe, another case of market failure. The market has failed, not because the mutuals are poorly managed or their time has run out, but because their rules are outdated and a small group with short-term interests--the carpet-baggers to whom my noble friend referred--can take advantage of that. If our mutuals disappear, our choice will be eliminated.
	The argument for maintaining mutuals is one of choice and competition. After all, if members of mutuals have free use of the company's capital, this must give them some competitive advantage, and that should be available to their customers.
	There are also social reasons for correcting this market failure. If the market economy becomes a market society, I believe that our society will change for the worse. We shall all be the losers. Almost every day now the Government have to decide where the market economy ends and where society begins. Mutuality is another such decision. And the decision should not wait long because as the assets of the mutuals increase, so the incentive for demutualisation becomes greater.
	I welcome the battle waged by Standard Life and the Nationwide Building Society. I congratulate the managers on their principles. If nothing else, this is proven by the fact that in previous flotations of mutual companies the biggest beneficiaries have sometimes been the managers by virtue of the large salary increases and share option schemes which accompany the changing status.
	More seriously, I welcome the sense of responsibility mutuals show in trying to look after the interests of future members. If future members do not have to pay the cost of capital, they must be better off. Some say that shareholder ownership is a spur to better management. This means the threat of hostile takeover. But these takeovers also have disadvantages. Few have created the so-called shareholder value which was promised. Many have done more harm than good. They destroy valuable relationships and the implicit contracts built up over many years. Just because this kind of damage is unrecorded by conventional accounting and so does not show up in the financial cost of takeovers does not mean that it has not happened. The competitive cost is there. I believe that that is an argument that mutuals must consider.
	In view of those wider considerations, I hope that the Government will take this opportunity to indicate support for the continued existence of mutuals.

Baroness Gardner of Parkes: My Lords, I congratulate the noble Lord, Lord Faulkner of Worcester, on his Question. I look forward to the Minister's Answer.
	Like the noble Lord, I must declare an interest as a Standard Life policy holder. I must also say that I am totally confused and have made a conscious decision not to vote either way in the current vote, not only because of this debate but also because I do not know which way to vote. I am in favour of mutuals. However, I do not understand the case for insurance companies as well as I do for building societies.
	I was a board member of the Woolwich for some years. In those days, we took conscious decisions again and again to remain mutual. Times have moved on, and I now find myself a Woolwich shareholder. I am sorry to say that the value of the shares has gone down since they were handed out to me, which is rather disappointing. Based on my experience, I do know a little about building societies.
	A point that I have made many times to Dr Davis of the Nationwide and to others who have come to speak to the Building Societies All-Party Group was raised in this debate by the noble Lords, Lord Haskel and Lord Shutt. It relates to reserves built up over many years, to quote the noble Lord, Lord Haskel. That is what is wrong with mutuality. The reserves that are held by building societies are too great. The pot of gold at the centre is what is attracting people. If the societies were giving a greater degree of benefit to their members all the time, no one would be carpet-bagging, because the pot of gold would not be there. That is the point on which the societies should take action.
	I was pleased when the Nationwide Building Society recently introduced a good savings account yielding interest of 7 per cent. I have money in the Nationwide; however, I was just on the point of taking it all out. Interest rates had gone up and up, and the Nationwide's rates had hardly moved at all. It seemed to me that that was wrong.
	I appreciate that no mutual can afford to offer savings at a loss, as has happened with Egg. A mutual must have adequate reserves. But there is no reason for the mutuals to build such enormous reserves that they cannot make use of them and they form nothing but an attraction, a honey-pot, a pot of gold. I give way to the noble Lord, Lord Haskel.

Lord Haskel: My Lords, I thank the noble Baroness for giving way. The existence of such reserves is what enables mutuals to give free use of their capital to new members.

Baroness Gardner of Parkes: My Lords, I thank the noble Lord for that comment. It is true. That is why I make the point about sufficient reserves--but excessive reserves are a different matter. Some building societies have built up huge reserves, and the hand-outs have been huge when they have been disposed of.
	I always remember Lord Houghton of Sowerby telling us in this Chamber how the building society movement started. I do not know whether he was referring to his father or his grandfather, but he said that a group of men got together and each put in a small amount of money until one man was able to buy a house. After that, they continued to put in small amounts, and the next man bought a house, and so on. It was a marvellous scheme, which grew into a huge success. The building society movement has provided housing for thousands, if not millions, in this country.
	Mutuality should be the best approach. It is good that dividends do not have to be paid to shareholders and that shareholders' interests do not have be watched over. The point was made that mutuality constantly has to be defended. That is cause for concern. The fight to keep an organisation mutual is a huge expense in itself, and it is not good enough. I have in front of me a cutting from today's Evening Standard about a company wanting to "hand back" the water supply because it is no longer profitable. There is something wrong if people want to provide the benefits of mutuality only because it is unprofitable and unattractive. That is not good. In its hand-out, Standard Life said that it had been a company for 100 years before it became a mutual. That is an interesting history in itself.
	I am typical of the many people who do not know where they stand on this issue. No one would refuse a nice little hand-out. Yet one does not want to lose the benefits and see these institutions destroyed. I am a supporter of mutuality and I should like to place that on record.

Lord Lea of Crondall: My Lords, this is a timely debate and we are indebted to my noble friend Lord Faulkner of Worcester for introducing it. I share the thrust of his analysis and indeed that of the noble Lords, Lord Shutt and Lord Haskel. I shall also turn shortly to a point made by the noble Baroness, Lady Gardner.
	My central concern is that the financial services revolution is going too far and is destroying some of the best traditions of our institutions, which, as history shows, have made a unique contribution to the social dimension of our lives and to society as a whole.
	This is not an occasion for specific legislative proposals. Already in the past year there has been some secondary legislation which has made modest improvements. The House of Commons produced an interesting report in July last year, as my noble friend Lord Faulkner mentioned--to which the Treasury made what might be described as a minimalist response in November.
	Perhaps I may quote one sentence from the Treasury response which I should like to query. Paragraph 8 of the Treasury special report states:
	"It would not be right to remove the right to demutualise enshrined in the 1986 Act or simply to increase the rights of those who want their society to remain mutual at the direct expense of the rights of those who wish to demutualise".
	My response to that is: well, yes, but I am not quite sure that we do not want a public policy bias in favour of protecting mutual and co-operative organisations. Even a level playing field is not always sufficient for some people--as Kevin Keegan's squad found the other night. In this context, we must decide what a level playing field is. The Government are asked to tell us about,
	"the role of strong mutual companies in promoting a health and competitive market in financial services".
	I spent my working career as a trade union official. As John Monks recently pointed out, Britain's trade unions and mutual organisations, including, for example, building societies, share a long history. They began as friendly society functions. They were established by the underdog to protect and advance the interests of the underdog. That function is still necessary. There are underdogs in need of mutual self-help and protection. We need a public policy bias in that direction. Otherwise, in the next 20 years we shall go round reinventing the wheel. John Monks states that,
	"Mutuals have always played a vital role in this country. They provide financial services to wide groups who are not well served by banks. They were set up to serve the community, and they still do. Their first loyalty is to their members, not their shareholders. And as they have no need to generate profits, over the long term they are guaranteed to beat any bank".
	One of the tests as to whether the Government are really committed to helping the underdog in this area is whether, in practice, they are making sufficient connection between social and financial exclusion and the problem of many of our inner cities, and indeed rural areas.
	There is a further point which has not been made in this debate. Never was there a time when trust in people's motives in financial services was at more of a premium. In a pub the other day, I heard someone say, "Independent financial adviser? You must be joking". That is the kind of comment that is widely heard at the present time. There is a need for trust in the financial institutions. There is a need for decentralisation. I cite just two examples: when the Town and Country Building Society closed its head office, that had a major effect on Clacton; when the Gateway closed, the impact was felt in Worthing.
	That kind of philosophy must be contrasted with the role of the carpet-bagger in investing a small amount of money in a mutual and then forcing it to distribute the assets. I echo what has been said about Standard Life. In the past few days I have heard it said on two occasions on the BBC that "today is the last chance for people to vote to get £6,000". We really must be careful about the media projection of some of these issues.
	I could say much more but time does not permit. I hope that my noble friend the Minister will give us a rather philosophical overview of where we are going in this field.

Lord Joffe: My Lords, I, too, am grateful that the noble Lord, Lord Faulkner, has raised this important issue, and I support the powerful case that he has made for the Government to take action. At the outset, I declare an interest as a policyholder of Standard Life.
	The issue has two dimensions: first, a moral dimension; and, secondly, one of competition. It is unusual to concern oneself with morality in financial matters. However, as the noble Lord, Lord Haskel, outlined, mutual organisations were set up for the benefit of their members and not for profit. Therefore, in my submission morality plays a very important part.
	The effect of demutualisation is simply that current members will appropriate for their own benefit the reserves created by previous generations of members. It could not possibly have been contemplated by those previous generations that that would happen to the reserves that they had a part in building. In so doing, the current members are depriving future generations of the benefits of mutualisation. They are also imposing additional expenses on future generations. Therefore, although it is perfectly legal, it is certainly not particularly moral. On the question of morality, it is also relevant to applaud the integrity of the managements of Standard Life and of the Nationwide, who, against their personal interests, support the continuation of mutualisation and the purpose for which the organisations were set up.
	I turn to the matter of competition. By and large, the products of good mutuals must be better than the products of good profit-making organisations. That is for the simple enough reason that there is no profit loading. The result of demutualisation is that consumers must pay more for the same products. In my view, it is the interests of consumers that are paramount in relation to the competition aspects. If consumers have to pay more because there is no competition from the most efficient organisations in the field, it is self-evident that government should intervene to protect them from unnecessarily high charges. Government should at least take action to ensure that the most competitive organisations do not disappear.
	It is relevant to consider the action taken by government thus far in relation to mergers and monopolies. If, for example, Prudential and Standard Life decided to merge, there is every possibility that the Government would say that that was contrary to the interests of consumers because it created a monopoly situation and distorted the market and, as a result, consumers would be overcharged in the future. Yet, if Standard Life demutualises, competition will disappear and, again, consumers will be prejudiced. I shall be interested to know whether the Minister can provide the rationale for the protection given to consumers as a result of mergers and monopolies legislation and the lack of protection which exists currently in relation to consumers who suffer from the effects of demutualisation.
	We know how easy it is for the current members of mutual organisations to be bribed to give up the benefits of mutualisation without regard to the future. We know how easily they overlook the fact that it may not be in their best interests from the long-term point of view. Because of that, if the Government consider that there is a role for strong mutual companies in promoting a healthy and competitive market, they had best take action soon because after the next three or four years there will be no strong mutuals to protect.

Lord Graham of Edmonton: My Lords, I congratulate my noble friend Lord Faulkner, not only on initiating the debate but on doing a first-class job in exposing the issues both for and against. In effect, this debate is a defence of the mutual principle. I applaud the principle of mutuality. The concept of "all for one and each for all" appeals to my political background and is the bedrock of a great deal of good.
	In practical terms, the benefits of mutuality have been sketched ably by my noble friend Lord Faulkner. I welcome the opportunity to restate the value of mutualisation and to plead with the Government. The noble Lord, Lord Shutt, tellingly told us that the stable door has almost been bolted. However, the stable door was opened by a government not of my political persuasion and for very good reasons. Their political philosophy saw the great opportunity that existed in the locked-in assets of building and insurance societies.
	My background is the Co-operative movement. In 1844, when the Rochdale pioneers began their sterling work, they produced, with the trade unions, the friendly societies and a great many others, the concept of helping each other. The great stakeholder was the member. I am delighted at the emphasis that has been placed by the noble Lord, Lord Shutt, on the value of member and consumer participation.
	It is only a few years since a predator decided that the Co-operative movement, through the CWS, which was the central federal organisation, was ripe for a takeover. It is due only to a vigorous defence of the CWS, the Co-op and the mutual idea, led by my noble friend Lord Fyfe, the chairman of the CWS, and by its chief executive, Graham Melmoth, that the Co-operative movement is as healthy today as it was then. These attacks come and they will go. We must acknowledge that the jungle in which we walk and try to survive has had predators for a very long time. The principle of "dog eat dog" is well established.
	In my view, it is terrible that the appeal to greed and avarice which has been launched in the past few years has found a resonance among so many people. I believe that it is immoral that the assets and prizes, which could have been distributed but which have been kept in the business to make it stronger, are now seen by the present generation as its entitlement. The Co-operative movement is no different. The asset base of the movement substantially comprised the untapped dividends of the members. The members left their dividends in place. Quite frankly, I believe that we should recognise that what we are seeing now could lead to something worse.
	However, it is not the end of the world. Reference has been made to Standard Life, and I wish its directors well. Hitherto, the motivating force for demutualisation has been the directors of the companies who stood to gain the greatest benefit. They knew that once the companies demutualised, there were rich pickings. The first fat cats in our society were the directors of demutualised businesses.
	The noble Baroness, Lady Gardner, makes a valid point that the retention of assets can be taken too far, but I would much rather have them prudently managed in that way, particularly if members are being looked after by better terms.
	The Minister can do the House a service. The stable door has not been bolted completely. There is still a battle to be fought and won. The Co-operative movement has 8 million members and 30 or 40 big regional co-operatives. They will resist any such move this time, next time and whenever it comes. The Co-op will fight, fight and fight again to retain the principles on which it was established.
	The last time that I spoke in a debate on this subject was the day that the Link building societies put forward a scheme to attach excessive charges to hole-in-the-wall machines. I got my debate on an important day, just as my noble friend, Lord Faulkner, was lucky to get this debate tonight. The battle is worth fighting, so I congratulate my noble friend on giving us the opportunity to put in our two pennyworth.

Lord Northbrook: My Lords, I congratulate the noble Lord, Lord Faulkner, on securing this debate. Like other noble Lords, I should declare my interests, first as an investment manager investing in quoted UK life, banking and building society companies, among other UK plcs, and, secondly, as a holder of mutual and non-mutual insurance policies.
	I take as my starting point a helpful comment by the Minister. As the noble Lord, Lord Faulkner of Worcester, said, on 18th April, in response to a question from my noble friend, Lady Knight of Collingtree, the Minister advised the House that,
	"The Government's view is that a variety of different kinds of governance in the insurance industry"--
	which I assume that we can read as the financial services industry more generally--
	"is a good thing. Therefore there is a place for both mutual companies and for shareholder-owned companies".--[Official Report, 19/4/00; col. 703.]
	That makes sense and is important. As Charles Leadbeater, writing in the Guardian a year or so ago, put it:
	"Putting all our organisational eggs into a single basket threatens disaster. We need a healthy ecology of competing organisations and that requires a variety of forms--traditional companies, partnerships, mutuals, co-operatives, social enterprises--to choose from".
	At least in part, that is the appropriate answer to the question posed by the noble Lord, Lord Faulkner, about the role of strong mutual companies in producing a healthy and competitive market in financial services. We support that. It underlies the point that while, according to the Financial Times,
	"The 'mutual vs plc' argument is sexy--and easy to write about",
	it is far too simplistic to perceive the issue merely in those terms. The merits of both sides of the argument are well rehearsed. The noble Lord, Lord Faulkner, and others have enunciated them again tonight most eloquently and I do not need to labour them. However, it is too easy for the debate to become polarised. It is right for the adherents of each side to fight their respective corners, but we have to bear in mind that if competition is to be enhanced and diversity maintained, it is in the interests of the industry and the consumer that mutuals and plcs--and other organisational forms--should co-exist.
	What are the strengths and weaknesses of mutual companies? A well run mutual life company, for example, has certain key advantages over its quoted public rivals. It does not have to pay a dividend, and therefore will have more of its surplus to pay out to policy holders. It does not have a share price to be concerned about, and therefore can be less concerned about short-term fluctuations in profit. The mutuals can also make use of a strong local identity to promote themselves.
	However, mutuals can have disadvantages. First, due to their size, many may not be able to compete in the long term with their larger quoted brethren. That can be a particular problem in the mortgage market where the size of the market leaders, such as the Abbey National, the Halifax, the Cheltenham and Gloucester and the Woolwich, can lead to greater competition in the setting of rates which the smaller companies may not be able to match over a long period.
	Secondly, because of their structure, mutuals can be less able to react to problems within the company, such as additional competition or poor investment performance. Whereas the stimulus of outside shareholders can force change for quoted companies, there is no such mechanism for the mutuals under their existing status.
	Some commentators argue that the greatest threat to the survival of mutuals is the management deciding to change to plc status rather than the investors in the company's products.
	In summary, neither type of organisation is intrinsically better or worse than the other. What really matters is that the best run of each brings its own benefits to the needs of financial services product consumers.

Lord McIntosh of Haringey: My Lords, I, too, congratulate my noble friend, Lord Faulkner, on introducing this timely debate. I have scored the debate at six in favour and two don't knows. I have counted the noble Lord, Lord Northbrook, and the noble Baroness, Lady Gardner, as don't knows.
	I have been asked by my noble friend, Lord Lea, to give a philosophical overview. I do not think that I shall be able to do that in the 10 minutes at my disposal, particularly as I have to start by declaring an interest, as others have, as a policy holder of Sun Life of Canada and Scottish Widows, both of which have recently demutualised against my vote. That is my starting point.
	Let me start with building societies, as the noble Baroness, Lady Gardner, did, remembering a dear friend, Douglas Houghton. Most of the building societies started with as few as 10 friends putting money aside and using the funds to buy one house, then buying more for other members in turn. They dissolved when they had achieved their objectives. A century ago, there were 2,000 of them. Now mergers--a much more significant phenomenon in a sense than demutualisation--mean that there are only 68, of which only nine have converted to plc status. I agree that those nine are among the biggest.
	The first legislation for building societies was enacted in 1874. The Building Societies Act 1986 was the first substantial revision of it.
	Building societies work on a one-member, one-vote basis. The board is elected by the members to act in their interests. Only the board can propose conversion to or takeover by a plc bank. A vote requires 75 per cent. of saving members on a 50 per cent. turnout and a simple majority of borrowing members. Borrowing members have a veto, regardless of the strength of support among saving members. Those are rightly high thresholds for change.
	Despite those high thresholds, when boards have proposed conversion, the votes in favour have frequently been in excess of 95 per cent. on a 75 per cent. turnout. In 1997, the Halifax, the Alliance and Leicester, the Woolwich and Northern Rock got 98 per cent. votes in favour. That is quite a facer for those who want higher thresholds still.
	I shall not go into the history of insurance societies, except to say that mutuals and non-mutuals both have long traditions. Demutualisation has happened not only in the United Kingdom but also in Canada and Australia, and it is not one-way traffic. This year, the Royal London took over United Assurance, which is a plc, and as we have been reminded, Standard Life was a shareholder company for 100 years until it mutualised in 1925.
	There are over 100 mutual insurance companies. Many are small; for example, provident and mutual health insurance specialists. Most mutuals are general insurance businesses and demutualisation is focused largely on large life mutuals. But even there, some significant players such as the National Farmers Union and Wesleyan Assurance are still mutual companies.
	As for the procedures for the demutualisation of insurance companies, there is no legislation governing voting because many are mutuals registered under private Acts. So the business and commitments have to be transferred to a company limited by shares created for the purpose.
	The Insurance Companies Act 1982 sets the framework for that and the regulator, the Treasury--in practice, the Financial Services Authority--has a say in the way in which that is done. Those who believe that they may be adversely affected may make representations to the court.
	A number of noble Lords, notably my noble friend Lord Faulkner and the noble Lord, Lord Joffe, have said that other things being equal, mutuals should have an advantage. Indeed, that should be the case. But it is very difficult to prove that. One can almost always find figures to prove either case. Past performance may not be a guide to the future, as it always says in the small print in the advertisements. Payout performance data on policies that run their full term are unhelpful if many are terminated or surrendered early. One can make comparisons between different forms of policy, on the length of policy, on surrender values and on termination values. Those are too complicated from which to draw simple conclusions about which is better. Some companies may be building reserves which may restrict pay-outs. Are they performing less well? It is extremely difficult to say.
	On the one side is the theory that, as a company owned by shareholders, management will be driven to perform better. On the other side there is the undoubted fact that mutuals do not pay dividends to external shareholders. However, there is not enough empirical evidence yet, if there ever will be, to test either theory.
	Reference has been made to the Treasury Committee report last year which proposed a number of primary legislation changes: aligning the voting thresholds for borrowing members with saving members; applying the same thresholds on members' resolutions proposing conversion; preventing members of less than two years' standing from receiving a share distribution on conversion.
	The Government's view is that although, of course, we believe that variety in the market-place is healthy, there are difficulties with the Treasury Committee's view. We must remind the House that borrowers have a veto although they have only one-seventh of the membership. So against the principle of one-member, one-vote, they already have more than their natural share of voting power. When we are looking at the interests of consumers, borrowers, the policyholders, are the consumers for those societies. Experience shows that borrowers vote in the same way as saving members. That may not be a pleasant thought but that is the truth of the matter.
	I remind the House that members' resolutions do not have any statutory force. It is the board which must act and the members cannot require the board to do so. Those votes are effectively opinion polls. Imposing voting thresholds does not make any difference to the strength of members' views.
	I heard what the noble Lord, Lord Shutt of Greetland, said about charities. All large societies have charitable assignment schemes in place. I heard what has been said about the two-year rule. But that would mean that only longstanding members, rather than charities, would receive windfalls and that would not affect the voting. When Lloyds took over the Cheltenham & Gloucester, the two-year rule applied and 95 per cent voted for demutualisation on an 84 per cent turn-out.
	Of course, we recognise the intergenerational equity issue. We believe that the boards should take account of future customers; that is, potential policyholders. In the case of insurance companies, the regulator must have regard to the ability of the business to fulfil reasonably expectations of policyholders and potential policyholders.
	We have taken action ourselves. We increased the turn-out threshold on conversion votes in 1977 and we have encouraged the Building Societies Commission to increase the number of backers required to nominate board candidates, propose members' resolutions and requisition general meetings.
	The Question on the Order Paper asks the Government what they consider to be the role of strong mutual companies in promoting a healthy and competitive market in financial services. Obviously we consider that role to be important. We agree with the thrust of the Question. The subtext is whether we are going to do anything else to prevent demutualisation. I have explained what we have done to make demutualisation more difficult. The problem we have is that the pressure for conversion comes from the members. If we were to support proposals for legislative change, we should risk destroying the very essence of mutuality in an attempt to protect it.
	High hurdles are in place before institutions can convert. But in the end, the only way for societies to ensure their own future is to convince their members of the benefits which mutuality can bring. Many societies are doing so through the rates and returns they offer and the quality of service they provide. In the end, the future of those societies is in their own hands, and that is the way it should be.

Child Support, Pensions and Social Security Bill

Consideration of amendments on Report resumed.
	Clause 18 [Financial penalties]:

Baroness Hollis of Heigham: moved Amendment No. 60:
	Page 18, line 15, leave out ("in his absolute discretion").

Baroness Hollis of Heigham: My Lords, in moving this amendment, I shall speak also to Amendment No. 61. These amendments are minor technical amendments. First, Amendment No. 60 will put beyond any question that we might, by using the words "absolute discretion", intend to create a bar on the exercise of judicial review in connection with the imposition of penalty payments. The amendment, however, maintains the policy intention that discretion will be exercised reasonably, based on the circumstances, in order to determine the amount of the financial penalty.
	During consideration of the Bill, the noble Earl, Lord Russell, moved an amendment to probe the intention behind the meaning of "absolute discretion" in connection with this clause. There was concern that the intention was to oust the jurisdiction of the courts as regards judicial review. There was never any such intention. We always expect the Secretary of State to act reasonably but I thought that the noble Earl made the better case. Therefore, I am happy to bring forward an amendment to meet the noble Earl's concerns without changing the policy intent.
	Amendment No. 61 is a minor amendment intended to clarify the drafting of Schedule 3 to the Bill. Currently, paragraph 11(3)(b) of the schedule amends Section 4(9) of the Child Support Act 1991 by adding the words "treated as made" after the word "application". However, the word "application" appears twice in Section 4(9). We are therefore taking the opportunity to clarify our intention and to put beyond a doubt which part of Section 4(9) is to be amended. With that brief explanation, I beg to move.

Earl Russell: My Lords, I thank the Minister very warmly indeed for Amendment No. 60. I am extremely glad that she is satisfied about the case, although I must admit that when she sat down at the end of our discussions in Committee, you could have fooled me.
	She has discharged her duties like a trooper, as a junior Minister should. She is to be congratulated on spotting the point; on having the clout to persuade other people within the Government of its validity; and on drafting the amendment in such a way that it is a good deal better than my original one. I am absolutely satisfied and I warmly thank the Minister.

On Question, amendment agreed to.
	Schedule 3 [Amendment of enactments relating to child support]:

Baroness Hollis of Heigham: moved Amendment No. 61:
	Page 107, line 27, after ("after") insert (""an").
	On Question, amendment agreed to.
	Clause 30 [Earnings from which pension derived]:
	[Amendment No. 62 not moved.]

Lord Astor of Hever: moved Amendment No. 63:
	Page 26, line 41, leave out ("six") and insert ("eleven").

Lord Astor of Hever: My Lords, in moving Amendment No. 63 I shall speak also to Amendment No. 64. We shall not be moving Amendment No. 65.
	With six children of my own, I feel I can comment objectively on the amendment. Even after children reach the age of six, they can place major demands on a carer. My nine year-old son needs just as much, if not more, care now than he did when he was five. It seems unreasonable that pension rights for those who make a major commitment to their family should suffer as a result.
	In Committee the Minister gave the Government's reasons for the requirement that a child should be under six for its carer to qualify for the state second pension carer's credit. I did not find those reasons persuasive. We propose instead that deemed benefit contributions be received by those who look after children up to the age of 11. That is consistent with labour market reality. Many more women work full time when their children are over 10.
	We are sympathetic to the amendment tabled by the noble Lord, Lord Goodhart, although we prefer the age of 11 to that of 12. I beg to move.

Lord Goodhart: My Lords, Amendment No. 64 stands in the name of myself and my noble friend. It is, of course, to exactly the same purpose as Amendment No. 63 which has just been moved by the noble Lord, Lord Astor of Hever. The arguments we would put are exactly the same as those which he put. The only difference between us is that we propose the age of 12 rather than 11. We do that because we believe that for many children the first year of secondary school is a difficult and, in a few cases, a traumatic one, and it is reasonable for mothers to decide that they will stay at home rather than commit themselves to work until the end of the first year of secondary school of their youngest child. Therefore, we suggest that the appropriate age is 12 rather than 11. However, subject to that, we are in agreement with the amendment moved from the Conservative Benches.

Baroness Hollis of Heigham: My Lords, I am sorry that I was unable to persuade your Lordships in Committee that the Government's policy was the right one. As your Lordships will know, the Government propose that anyone who earns less than the annual lower earnings limit in a given year who is looking after a child under age six and receiving child benefit will accrue entitlement to state second pension (S2P) in respect of that year. In effect, we are targeting extra help on people looking after children up to early primary school age.
	That is because we recognise--as can be seen in the employment patterns of mothers with young children--that carers (usually mothers of children below school age) have the least opportunity to work and earn above the lower earnings limit. That is why we are seeking to help them and to ensure that they have the opportunity to build up a decent pension in older age.
	The problem currently under SERPS for people caring for a young child is that for every year that they are not working they get a smaller pension when they come to retire. That is a significant reason for women, who are most often affected by periods of caring for children, getting less from SERPS on average than men.
	Our proposals for S2P will help to address that problem. Almost 1.5 million women will benefit. Five years out of work looking after a young child will give someone additional pension of about £5 a week in state second pension. Under SERPS, that same person would have received nothing at all.
	However, the amendment focuses on whether that guarantee or passport into S2P should apply beyond the age of five up to either 11 or 12. Your Lordships will know that many mothers of school-age children choose to combine their caring duties with part-time work. Many of those parents will benefit from the low earner's boost in the state second pension by earning as little as £3,500 per year. That means that as a result of the minimum wage, someone will only need to work about 18 hours a week to gain access to the boost.
	I have done some calculations. If, for example, a mother with a child from five or six upwards was working five hours a day just for term times weeks--which is well within the school day, even for children of the age of six onwards--at a minimum wage she would already be above the LEL and qualify. That means that a person working a fairly low number of hours--five a day, in term time only--at minimum wage will qualify. Anyone who combines a part-time job with child caring, as around 60 to 70 per cent of married women with children over the age of five or six do, will qualify for S2P. I believe that that is a perfectly reasonable position for us to propose.
	Obviously, some mothers may choose to stay at home even when their children are older; whether they are 10, 12 or 14. Some may have no choice because of family or other circumstances. If, for example, those circumstances include a disabled child, they might receive ICA. That would give them other qualifications. It is not our intention to punish them for that. Indeed, we are doing a great deal to help stay-at-home mothers, including big increases in child benefit and really big increase in income-related benefit rates for young children, which have gone up by nearly 100 per cent in three-and-a-half years since the Government came to power.
	We are also introducing new rights for parental leave. But we have to ensure that mothers have the choice to return to work if they want to, and the majority do. That is why we have introduced the working families' tax credit, the childcare tax credit and the national childcare strategy. As a result, women are coming into work.
	Focusing S2P and the HRP credit for it on those caring for children under school age matches the choices most women make. Generally, mothers take career breaks or periods out of work when their children are very young. As most children start school well before they reach age six, mothers will have had time to adjust to the change and look for suitable part-time work if they choose to do so, as most do. They will be able to qualify for S2P by working within the normal hours of a school day. It is a decision about individual choice. Entitlement to state second pension will simply be one more factor to consider.
	Obviously, bringing up children is a valuable contribution. Given what I have said, I hope that your Lordships do not think that mothers have to choose between part-time work, if that is what they wish, and bringing up children over the age of five or six and thus disqualifying themselves for state second pension. These are combinable and are combined by most women. However, we are focusing help on those mothers with younger children, below the age of five, where there is not that same access to part-time work, given that the children are still dependent upon them. That is where we believe our priorities should lie. I hope that with that explanation, your Lordships will not feel the need to pursue the amendment tonight.

Lord Astor of Hever: My Lords, I thank the Minister for that response. I take on board the points she makes about part-time work. I agree with the noble Lord, Lord Goodhart, that there are times when it is reasonable for a parent to remain at home looking after a child or children up to the age of 11 or 12. They should not be penalised for that. We shall, of course, carefully read Hansard. However, in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 64 and 65 not moved.]

Lord Goodhart: moved Amendment No. 66:
	Page 27, line 9, at end insert--
	("(e) the pensioner--
	(i) did not have an earnings factor for the year equal to or greater than the qualifying earnings factor for the year; but
	(ii) would have had such an earnings factor if he had had earnings equal to the lower earnings limit in each week in which paragraph (b), (c) or (d) would have applied to him if the words "throughout the year" had been omitted").

Lord Goodhart: My Lords, in moving Amendment No. 66 I shall speak also to Amendment 67. Although it is not formally grouped with Amendment No. 66, I believe that it may be convenient if I speak to it at the same time because it covers a good deal of common ground.
	This is the first in a short series of rather complex amendments on matters concerning pension contributions. Clause 30 of the Bill inserts a new Section 44A into the Social Security Contributions and Benefits Act 1992. Among other things, it gives deemed pension credits for the S2P to people who qualify in four different categories. I regret that my amendment covers only three. I notice that I failed to take up a point made by the Minister in Committee. The four categories are: first, those who qualify as recipients of invalid care allowance; secondly, those with home responsibility for a child under the age of six; thirdly, recipients of long-term incapacity benefit; and, fourthly, recipients of severe disablement allowance. In each of those four cases, the pensioner, or prospective pensioner, gets credit only if he or she falls within that category for the whole of a fiscal year. This creates serious problems for what might be described as the "entry and exit years"; namely, the year in which the right to the benefit begins or ends. I use "benefit" as a shorthand way of including people with home responsibility, who are not receiving benefit as such.
	If in the entry or exit years a contributor has sufficient earnings, he or she qualifies for S2P credits on that basis. The level of earnings required, as I understand it, is 52 times the lower earnings limit for each week. That aggregate is described as the "qualifying earnings factor". But there will obviously be many cases, particularly if the change from earner to carer comes early in a fiscal year, in which the contributor will not have reached the qualifying earnings factor before he or she switches from earning to caring.
	Therefore, as the Bill now stands, many people will lose the year's credit towards the S2P for their entry and exit years because they do not have sufficient earnings in those years to reach the qualifying earnings factor, but have not been receiving the relevant benefit for the whole of that year. I believe that that is unfair. Why should people in those circumstances lose credit? Not only is it unfair, it is also random, because the question of whether a contributor has reached the QEF in any particular year may well depend on whether the switch from earning to caring, or earning to benefits, has happened late or early in that year. Moreover, it is worse than random because it discriminates against the poor. Even though, of course, earnings above the higher earnings limit are disregarded for this purpose, one will reach the QEF much more quickly if one's earnings are at the higher earnings limit than if they are at the lower earnings limit. So, this is irrational; it is random; and it is discriminatory against the poor.
	The way of curing that problem is obvious: to allow people to mix and match. If someone switches from earnings to benefits half way through the year, surely one should take the earnings for the first half of the year and add on a notional credit for earnings at the lower earnings limit during the period when that person has been in receipt of benefits. That in the great majority of cases would solve that particular problem. Therefore, why not allow mix and match?
	In Committee, the noble Baroness, Lady Hollis of Heigham, recognised the problem and promised to look at it again. No doubt she has done so, but no government amendment appears in the Marshalled List. Clearly, although she has looked at it again, it has been decided that nothing should be done. I have to say that I find it difficult to believe that the problem is as intractable as that. I await with interest her explanation.
	The only problem that I can see is that the Contributions Agency, which is now part of the Treasury, will have to talk to the Benefits Agency. The Contributions Agency will know what a contributor's total earnings were in any year. It will have to find out from the Benefits Agency, whether any person was receiving relevant benefits for part of that year. Surely, those are facts which are relatively simple to ascertain. All one has to do is to put the two of them together, and "hey presto", if the aggregate sum reaches the qualifying earnings factor, problem solved. I do not believe that the problem is insoluble. I believe that if there is a will to solve the problem, it could be solved.
	I should like to finish by referring briefly to Amendment No. 67. That derives from a matter raised by the noble Baroness, Lady Pitkeathley, both at Second Reading and in Committee. There is a special problem which relates to ICA (invalid care allowance). This can be lost temporarily if a person cared for is in hospital or respite care for more than 28 days in any one period of six months. The pension credit, therefore, in this case may be lost not only in the entry and exit years but in an intermediate year in which the hospital or respite care exceeded the permitted amount.
	The purpose of the amendment is to allow a carer to continue claiming the pension credit, although not the ICA itself, during the period of hospital or respite care of the person being cared for, for up to three months. This is perhaps a relatively small point, but it is surely a very important one for those who are affected. I believe that the Government would do well also to accept the principle of this amendment. I beg to move.

Baroness Pitkeathley: My Lords, in Committee I put my name to an amendment similar to this one in the name of the noble Lord, Lord Goodhart. I have not done so on this occasion because I believe there may be some technical difficulties with the suggestions that he puts forward. However, I want very much to speak in support of the principles which I believe underlie his amendments. I raised these issues about carers' income at Second Reading and in Committee. I must acknowledge the huge progress that has been made for carers in recent years: the Carers (Recognition and Services) Act 1995, the National Carers Strategy, and--if your Lordships will forgive the commercial--the Carers and Disabled Children Bill, which I shall bring before your Lordships' House tomorrow. But, so far as income is concerned, progress for carers and policy thereon have not kept pace.
	At Second Reading I asked about a review of carer's benefits. I raised that again with my noble friend last week in a Starred Question. I am particularly concerned at this moment about carer's income because the latest survey published by the Carers National Association--Caring on the Breadline--shows that 77 per cent of carers say that they are worse off as a direct result of their caring responsibilities; one in three have trouble paying for gas and electricity; and one in three have been or are in debt. It is an extremely gloomy picture.
	I know that the Government value carers. But on the question of income, carers are beginning to have doubts about that. I am not suggesting that there should be vast influxes of money; like all carers, my requests are modest. But small changes can make big changes in carers' lives; for example, raising the earnings limit for invalid care allowance and the lower earnings limit for national insurance contributions; introducing a taper on invalid care allowance; extending invalid care allowance for eight weeks after the death of the person being cared for. There is a precedent for that, as I pointed out on an earlier occasion, because the carer's premium, which was introduced some years ago, extends for eight weeks beyond the death of the person. Alternatively, the respite care provision could be continued as suggested by the noble Lord, Lord Goodhart, in Amendment No. 67.
	I hope that the Minister, who I know is extremely sympathetic to the problems of carers, will take note of these points, either now or at Third Reading. The Government must show some movement in this area if carers are to be reassured that they are valued in the way that everybody agrees they deserve.

Baroness Hollis of Heigham: My Lords, we discussed Amendment No. 66 in Committee. As the noble Lord, Lord Goodhart, said, in good faith I took it away to see what I could do.
	The intention of the amendment is to allow someone with earnings below the annual lower earnings limit for the year (LEL) to benefit from the lower earner's boost where they were also entitled to ICA, long-term incapacity benefit or home responsibilities protection (HRP) for part of that year.
	During the previous debate I tried to set out the very real difficulties underlying what the amendment sought to achieve. I said that I had then and continue to have sympathy for it. I hoped that if there were an easy solution we would find it. I was more than willing to take it away to see what we could do.
	We have examined these matters again. Speaking personally, I have been engaged in two quite long and extensive meetings with officials. I am still unable to see a way through the difficulties, as I shall explain. But perhaps for those who were not present at the time, I can say what the nature of the problem is.
	As is the case for SERPS, entitlement to S2P (state second pension) will be calculated on an annual basis on a person's surplus earnings; that is to say, the amount by which someone's earnings exceed the annual lower earnings limit of £3,500. That means that we need to look at someone's earnings over the whole of the tax year in question. That is consistent with the annual returns made by employers on each employee's earnings in the preceding year.
	This means that someone who has earnings between the annual LEL and the low earnings threshold for the year in question will benefit from the state second pension low earner's boost. And someone who has been entitled to ICA or long-term IB throughout the year will be credited into the state second pension.
	The noble Lord, Lord Goodhart, supported by my noble friend Lady Pitkeathley, was seeking to see whether we could mix and match benefits and earnings for the entry and exit years. The difficulty is the consequential anomalies that would result. We have found ways around some of the problems, but there are others we are unable to resolve.
	We have proposed that it will be necessary to meet the qualifying criteria for the whole of a year--that was the original intent--because it would not be operationally feasible for either employers or the department to move to a system which calculated entitlement not on a yearly basis, but on a weekly basis, given that all earnings details are provided on an annual basis by employers and are recorded as such by the department.
	Having looked carefully at that issue to see whether we could find a workable solution, we established that it would be operationally possible to combine earnings for weeks in which someone earns over the lower earnings limit (£67 a week) with credits for ICA and long-term IB recipients, treating the credits as if they were equivalent to earnings at the level of the weekly LEL. So far so good. Technically we could do that.
	The problem arises--it may be that I did not explain this fully enough at the time, but I have been round this time and again and cannot see a way forward--when we try to read across to home responsibilities protection for basic pension purposes. HRP will be of much greater benefit to such carers under our proposals for state second pension, and we intend many more to be aware of it. But as HRP is only available for whole years of caring activity, we cannot unpick and revise that legislation to allow for part years. Any measure therefore which benefited only certain carers would not only be morally difficult to justify, but would also leave us open to future ECHR challenges.
	Perhaps I can remind your Lordships that ICA goes to those who are caring for more than 35 hours a week and earning less than £50 a week and therefore are likely to be either in a household where no one is in receipt of benefit or, alternatively, are likely to be in work. As the noble Lord said, it is not beyond our wit to do a mix and match for entry and exit where people are above the LEL for the other part of the year. Our problem lies with home responsibilities protection: HRP goes to two other major groups. It goes to the carers of elderly or disabled people who qualify for ICA but do not receive it; for example, those who are on income support with the carer premium, the poorest carers, or those who, although they are entitled to ICA, also get another, higher benefit, such as widows' benefit or IB, who are often the most frail carers. So those who most need the protection are those who are most likely to be protected by HRP, rather than getting ICA.
	Given the way that all the records are built up, we cannot possibly "part-year" home responsibilities payments for carers. Even if we could, we would have to consider what to do about the people receiving HRP because they are caring for children under five. The cost of extending these exit and entry years would be extremely high--about £200 million per year. In addition, we must also consider the implication of extending that to a group far wider than that envisaged by the noble Lord.
	Our problem is that wherever the line is drawn, greater anomalies are created than if that line was not drawn at all. That is our dilemma. We can solve it for those on ICA. However, we cannot have equitable treatment of those carers of older people who are receiving HRP without at the same extending it to other groups, who I am sure are not envisaged by the noble Lord as requiring entitlement, such as those who get HRP through caring for children. For HRP, that is built up on an annual basis.
	I am very sorry about this. I very much wanted to see whether we could deliver a mix and match. I recognise the arguments and I have every sympathy with them. However, I now honestly believe that we cannot do it without producing more anomalies than we solve. I am afraid that the read-across consequences of doing something which here looks decent, right and proper, but which in turn generates other unfairness and injustice in the system, is a recurrent problem in social security. It is for that reason that, although I took away the provision in good faith, I have not been able to come back with something that will meet the concerns of the noble Lord tonight. With that explanation, I hope that the noble Lord will accept my arguments.
	The noble Lord also referred to Amendment No. 67. It may be helpful if I remind your Lordships about the interaction of ICA rules regarding periods spent in hospital and residential care, including respite breaks. During any six-month period, ICA can still be paid for four weeks when there is a break in the caring. In addition, it remains payable for a total of eight weeks in a six-month period if either the carer or the disabled person is in hospital. The total of 12 weeks can all be taken as a hospital in-patient if no respite breaks are taken. If the carer is in hospital, the eight weeks could cover one period. However, if the disabled person is in hospital, the length of time for which ICA is payable depends on the disabled person's DLA or AA still being paid.
	The DLA and AA rules for periods in hospital have recently been changed to extend entitlement to DLA and AA to include the day of discharge from hospital and the day of admission to hospital, which means that there will be fewer cases where there is a break in entitlement. Similarly, the carer of a disabled person--it might be a severely disabled child in a weekly residential school--who is in publicly funded care all week, but who returns home on Saturdays and Sundays, could now become entitled to ICA for the whole week. Because of the discharge rules of DLA and AA, that would not previously have been possible; it is now possible. There has been some decent movement on that front, where, particularly for parents with disabled children or someone in weekly residential care, the entry and exit days do not jeopardise their entitlement to ICA. I think that the rules are quite generous.
	This amendment would introduce a set of different rules in S2P for periods spent in hospital or residential care for respite breaks to those receiving ICA, which we think would be administratively cumbersome. A carer whose ICA had ceased during such a period would be treated as though they were still entitled to ICA for up to three months at a time, which is quite a long period in which to have a roll-over of entitlement. It could be repeated several times during the year. Therefore, although the majority of the year could be spent not caring, that year would still provide a year's entitlement towards S2P.
	In addition, it is worth noting that this proposal would break the essential link between DLA and AA and its carry on entitlement to ICA and, therefore, the link between ICA and caring for a severely disabled person.
	With regard to Amendment No. 67, I hope that the noble Lord will agree that the Government have gone quite a long way to meet some of the very real concerns. I hope that he will recognise, however, that we cannot do what he is now asking us to do, which would not only be cumbersome but probably unfair. In the light of my explanations and my regret that we cannot move on Amendment No. 66, I hope that the noble Lord will withdraw his amendments.

Lord Goodhart: My Lords, I am most grateful to the Minister for the obvious effort that she has put into seeking a way round what are undoubtedly real administrative difficulties in this matter. I very much regret that it has not been possible to find a way round these difficulties, because I think that this is a cause of real unfairness and injustice.
	I accept that it would, of course, cause anomalies to extend the measure to cases in which it could be done, such as ICA, while not extending it to HRP. At the same time, however, I want to say two things about that. First, the anomaly is no greater than the existing anomaly where someone who starts drawing ICA on 31st March will then get credits starting from the following 6th April, whereas someone who starts drawing ICA on 12th April will have to wait nearly a whole year to be able to get the credit. That seems to me to be at least as serious an anomaly as the other one.
	I also think that this is perhaps a case where the following principle applies: thou shalt not do a just thing today for fear of having to do a juster thing tomorrow. Were the Government to at least extend it where it could be done with relative administrative ease, they might find themselves more motivated to come forward with a solution for the more serious difficulties surrounding HRP.
	Nevertheless, I feel that this is a highly technical issue. Without the administrative backing that the noble Baroness enjoys, I am reluctant to insist that this problem that can be overcome. In those circumstances, it would frankly be wrong for me to do anything other than beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 67 not moved.]

Lord Higgins: moved Amendment No. 68:
	Page 27, line 14, after ("1") insert ("and Class 2").

Lord Higgins: My Lords, the House is most fortunate in having a Minister who is able to explain the kind of technicalities that we have just debated. Indeed, if I may presume to say so, she gave quite a remarkable exposition. However, I fear that the matter now before us is probably equally complicated. I recall that I used to give instructions to parliamentary draftsmen a long time ago on how to draft a particular passage of legislation. A month or two later, when the matter reached Committee stage, I would perhaps experience some difficulty in recognising what was before me because there seemed to be no resemblance whatever between what I had asked them to do and what appeared on the face of the Bill. The drafting of this clause is somewhat unusual. I hope that the Minister will be able to clarify one or two points in that respect.
	The whole clause is drafted in relation to Section 22 of the Social Security Contributions and Benefits Act 1992, but it relates to the state second pension, which is entirely new. Can the Minister say whether this section has repercussions on other pensions legislation apart from the state second pension? If it does not, can she tell us why it is set out by reference to the 1992 Act, when the state second pension could perfectly well have been self-contained? It is always most unfortunate to approach these matters by reference to previous legislation, because the subject matter is not then self-contained.
	Having said that, it seems to me that we have a strange two-tier system of drafting before us. Under subsection (3) of Clause 30, a new Section 44A (Deemed earnings factors) is to be inserted into the 1992 Act. My amendment relates to new subsection (2)(d), as set out at the bottom of page 26 of the Bill. But, instead of going on to deal with all the other points relating to that subsection, the legislation goes on under new subsection (3) to define the,
	"requirement referred to in subsection (2)(d)".
	Thereafter, new subsection (4) says that,
	"the purposes of subsection (3)--
	the part I just quoted--are something else. I am not clear why those three provisions are not included in the same subsection. There are three descending tiers in the drafting. That makes it extraordinarily difficult to follow.
	I believe that the proposal includes the provision for a state second pension; I am not sure whether it also affects other pensions--so that when determining their deemed earnings factors one should not only take account of primary Class 1 contributions but also Class 2 contributions.
	If I understand the Bill correctly, it proposes to strip from those who undertake employment and self-employment in the same year the ability to count their income for both Class 1 and Class 2 contributions towards their pension. I understand that such an arrangement for both classes is possible under the existing legislation. Are we now adopting a more stringent process as far as those people are concerned? If I have understood the drafting correctly, this applies only to people who are on incapacity benefit payable throughout the year. This measure, unamended, would adversely affect the pension prospects of those who switch between low paid employment and self-employment--a group whose numbers may well increase as a result of rapid economic and technological change. I believe that the group is comparatively small but those who are self-employed are likely to have a small pension and to that extent they are more vulnerable.
	Having said that, I hope that the Minister will accept that for those on incapacity benefit who meet all the requirements that I have just set out, the fact that Class 1 contributions are taken into account is insufficient. They should at least be allowed to have Class 2 contributions taken into account in calculating their entitlement to the state second pension and, also, perhaps, to other pensions. I beg to move.

Baroness Hollis of Heigham: My Lords, I am in some difficulty in answering some of the noble Lord's questions. Our understanding of the amendment did not encompass some of the issues that he raised in his speech. I am sure that the noble Lord did not do that on purpose. However, I am anxious not to "wing" my words as people, and pension fund personnel, need to be given precise forms of wording to assess the Government's intention in this regard. I shall answer those questions that I can and respond more fully in writing to those questions which do not appear to bear much relationship to the amendment as we understand it. None the less they are perfectly legitimate questions to raise. I do not blame the noble Lord for asking those questions but he cannot blame me for not necessarily having the answers ready to hand.
	Amendment No. 68 would enable periods of self-employment to count towards the 10 per cent work requirement for long-term disabled people. As the noble Lord recognised, this raises the wider questions of pensions for self-employed people. It is in that context that I shall respond to the amendment.
	Our proposals for the state second pension will do a great deal for disabled people with broken work records--indeed it brings them into additional pension provision for the first time. Of course, one can always go further, but I believe that we have--in that favourite phrase--struck the right balance: providing extra help where it is most needed; maintaining incentives to work and save; and protecting those who cannot work for periods. We are doing this within proper and prudent public expenditure limits.
	We recognise that the nature of self-employment is changing and that there are real questions about how best to ensure that the self-employed are encouraged to save for their retirement, and protected where they cannot. There are wide-ranging issues which need to be explored, for example, the question of how including the self-employed in additional state pension provision would be funded. When we raised somewhat similar questions at Committee and Second Reading I was anxious to air with noble Lords the dilemma that while we were urged on the one hand to bring people within either compulsory stakeholder schemes or state second pension schemes there was a real problem with self-employed people who might regard their business as their pension. Any requirement to contribute to schemes, or any levying of national insurance for that purpose, might be regarded as a levy on their cash flow and on their ability to maintain the business. There are real dilemmas about what is the best public policy for self-employed people who may be working on very narrow profit margins, at least when they start.
	Whether self-employed people should eventually be brought into the state second pension was part of the consultation exercise on the pensions Green Paper. There were a wide range of responses and we are still considering the outcome. We are talking to pension providers on the one hand--because it obviously has implications for stakeholders--and with Treasury officials on the other. It would be wrong and premature to accept an amendment on the question of the state second pension for self-employed at this moment. We shall certainly return to the issue--the noble Lord is right to draw it to our attention in that respect; it will not go away--but whether we have yet got the right answer I am not sure.
	One of the questions raised by the noble Lord concerned the legal drafting. We are reforming SERPS through the introduction of the state second pension; in legislative terms it is still additional pension but the amount of entitlement is calculated in a different way. Therefore there are no repercussions for any other benefit.
	Perhaps I may write to the noble Lord on some of his other questions.

Lord Higgins: My Lords, in that case, why was it not self-contained? Why is it all done by reference to the 1992 Act? If it is concerned only with the state second pension, why is it done by reference? It may have repercussions if it is done that way.

Baroness Hollis of Heigham: My Lords, I cannot help the noble Lord on that question. I do not know why it was drafted in that particular form. If I were the noble Lord, Lord Ashley, I would know the answer by now. I shall have to write to the noble Lord. I apologise. I simply have not had any guidance as to why parliamentary counsel drafted the Bill in this particular form. Obviously I shall seek advice. If the answers I give to the noble Lord are unsatisfactory, he must come back to me and I shall make sure that he gets the fullest possible answer.

Lord Higgins: My Lords, I am not sure whether or not I have had an answer.

Baroness Hollis of Heigham: My Lords, it was the one I had already given. We are reforming SERPS legislation; this is why it takes the shape it does. If the noble Lord is less than fully satisfied by that answer, I shall make sure that he gets a fuller one.

Lord Higgins: My Lords, I am most grateful. I look forward to that. If I understand the noble Baroness correctly, now she is saying that this affects not only the state second pension--although that is the heading--but has repercussions for SERPS as well, which is not the heading. We obviously need to go into the matter further. I shall be grateful if the Minister will write to me with an explanation. Subject to that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Schedule 4 [Additional pension]:

Lord Goodhart: moved Amendment No. 69:
	Page 112, line 14, at end insert--
	(" .--(1) This paragraph applies if a pensioner attains pensionable age after the end of the first appointed year and the pensioner's earnings factor (as revalued under section 148 of the Administration Act) in respect of any relevant year before the first appointed year is an amount equal to or greater than the qualifying earnings factor but less than the lower earnings threshold at the date when he attained pensionable age.
	(2) The additional pension payable to a pensioner in respect of any relevant year before the first appointed year in which his earnings factor (as revalued) was equal to or greater than the qualifying earnings factor but less than the lower earnings threshold at the date when he attained pensionable age shall (subject to sub-paragraph (3) below) be calculated as if his earnings factor (as revalued) for that year had been equal to the lower earnings threshold at that date.
	(3) The number of years to which sub-paragraph (2) above applies shall not exceed the number of complete years between the beginning of the first appointed year and the date on which the pensioner attained pensionable age.
	(4) If the number of years to which sub-paragraph (2) above applies is less than the number of years to which it would have applied but for sub-paragraph (3) above, it shall be treated as applying to those years in which its application is most favourable to the pensioner.").

Lord Goodhart: My Lords, the amendment is a revised and, I hope, somewhat improved version of an amendment moved at Committee stage. The S2P is an ingenious and interesting idea which has a certain number of defects. One of them is the slow rate of build-up to the full benefits to be provided. If nothing is done to speed it up, we know that it is something which can take up to 40 years--someone's full working lifetime.
	The Minister said at Committee stage on 15th May that many of the lower paid,
	"can expect to see a significant boost to their pensions within 20 years or so".--[Official Report, 15/5/00; col. 86.]
	The implication is that there will not be a significant boost until about 20 years from now. That seems too slow.
	The effect of the amendment would be to speed up the benefits. The way in which it would do so is perhaps a little complicated. It would allow any past year in which the benefits derived from SERPS are less than they would have been had S2P then been in operation to be upgraded to the S2P level. That will apply to years in which the earnings of the pensioner, after taking into account the uprating in line with earnings factors, were lower than £9,500.
	In order to prevent a large boost in government spending on pensions, we have suggested that this should be done only a year at a time; only one year of SERPS can be exchanged for the higher level provided by S2P for each year after the Bill comes into effect in which a contributor has income at or above the level of the qualifying earnings factor. That means that the burden will be increased only gradually, but at rather less of a snail's pace than will be the case with S2P as it is now proposed.
	The previous version of the amendment involved the exercise of an option by the pensioner and, of course, a corresponding need to inform the pensioner of his or her right to exercise that option. That complication was rightly criticised by the noble Baroness. The new version tabled here operates automatically, without any need to get in touch with the pensioner to ask whether he or she wishes to exercise the option.
	Almost all of the benefit will go to those who are on relatively low earnings. As I explained previously, there is no point in exchanging SERPS for S2P for anyone whose earnings before downrating would have been more than £9,500. It will be of benefit only to someone whose earnings are below that level. That could be of some benefit to those who begin their careers on low pay but subsequently prosper. However, most of the benefit will pass on, proportionately, to those with a lifetime of low earnings.
	In our view, this will speed up the conversion of SERPS into S2P. It will provide enhanced levels of pension benefit for some of those who have, in the past, been entitled to only very low levels of SERPS. It will do so at a relatively gradual rate, but even so, it will enable S2P to become effective more rapidly than has been proposed by the Government. I beg to move.

Baroness Hollis of Heigham: My Lords, Amendment No. 69 is similar to one we discussed in Committee. It seeks to boost the amount of additional pension which someone with low earnings would receive from their years of SERPS entitlement while S2P is building up to maturity.
	The amendment would allow someone who had low earnings while in SERPS to have their SERPS calculated when they reach pensionable age as if those earnings, when revalued, were at the level of the lower earnings threshold. I am glad to see a comforting shake of the head to acknowledge that the amendment has been understood. That is not always the case!
	The number of SERPS years which could be enhanced in this way would be restricted to the number of years between the introduction of S2P and the reaching of pensionable age. This would give a retrospective boost for certain people for years before the introduction of S2P, based on the number of years' entitlement after its introduction.
	Perhaps I may remind noble Lords of what we are trying to achieve with S2P. We are reforming SERPS to refocus state help on those who have the least opportunity to build up good second pensions. SERPS has served many pensioners well, but because it is earnings related those who earn the least gain the least from it.
	Under SERPS, someone who earns just above the lower earnings limit for the whole of their working life will still retire on a state pension below the minimum income guarantee. And that is before the 1986 and 1995 changes to SERPS have their full effect. But under our proposals, anyone retiring with a full working life of employment behind them, or periods of caring or disability, from 2038, when the state second pension has built up, will receive a total of basic and additional pension above the MIG.
	We recognise that the benefits in S2Ps take time to build up. Pensions, by their very nature, are a long-term issue. I am sure that the noble Lord will have read the financial pages which state, "If you don't start building your pension at 23, 25 or 27 you will not have a decent one at 65 and you cannot come into a pension scheme at 50 and have anything much worth having".

Lord Goodhart: My Lords, I am grateful to the noble Baroness for giving way. That is true and those advertisements relate to funded pensions. However, as regards pay-as-you-go pensions, the level of pension is determined by what the Government think fit to charge by way of contributions or provide out of general taxation. There is no structural reason why it should build up gradually.

Baroness Hollis of Heigham: Except, my Lords, that current taxpayers have to fund at an additional cost the pensions of a previous generation which has not in turn funded other people to the same extent. That is the definition of a pay-as-you-go scheme. It is paid for in a different way. As regards a state second pension, there is not the advantage of an employer's contribution, which is available in occupational pensions or in some cases--I hope in money purchase pensions--of contributions along with the recycled rebates and the person's own contributions.

Lord Higgins: My Lords, but there are employer's contributions.

Baroness Hollis of Heigham: My Lords, in the state second pension?

Lord Higgins: My Lords, in the basic pension.

Baroness Hollis of Heigham: My Lords, I am talking about the difference between funded schemes, which involve the employer's and employee's contribution together with rebates, as opposed to pay-as-you-go schemes, which still have to be funded but by current taxpayers and national insurance contributors for a generation which is already coming towards retirement--

Baroness Turner of Camden: My Lords, does the Minister agree that all pension provision constitutes a contract between generations, no matter whether it is funded or pay-as-you-go? If it is funded, it comes from the overall economy, which is produced by the present generation in order to support the older generation. There is a contract between the generations, whether pensions are funded or pay-as-you-go.

Baroness Hollis of Heigham: My Lords, I, too, believe that pensions are a contract between generations, but I believe there is a deep difference between funded and unfunded schemes. I do not believe that my noble friend's formulation will overcome that. A funded scheme is a personal savings pot into which a person has put money, the employer has made a contribution, and there are recycled rebates and so forth which will grow. As regards pay-as-you-go schemes, whenever you make a pension scheme more generous, those who enjoy it are not the same people as those who have paid for it. The people are currently paying for it at a different rate from the previous generation. That is why, as my noble friend will know, many European countries, such as Italy, France and Germany, where there is a real desire to switch over to funded schemes, cannot do so because one generation will have to pay twice over; for their own scheme and for the generation which has gone ahead.
	While I do not disagree in general terms that pensions are a contract between generations, I believe that that conceals the real difference between the method of funding and the nature of that obligation between generations as regards funded and pay-as-you-go schemes.

Baroness Castle of Blackburn: Would my noble friend--

Baroness Hollis of Heigham: My Lords, it is the Report stage; it is not the Committee stage. I shall of course give way to my noble friend, but I suggest that we then return to Report mode.

Baroness Castle of Blackburn: Thank you. I wanted to ask my noble friend a question. If the sin of pay-as-you-go schemes is that those who enjoy them are not those who paid for them, is that not the essence of a means-tested benefit such as minimum income guarantee?

Baroness Hollis of Heigham: My Lords, I do not quite understand the purport of my noble friend's question.

Baroness Castle of Blackburn: Perhaps I may explain it. A person who pays for his pension as of right--the basic state pension--is told that he cannot be given anything, but if he falls within the minimum income guarantee, whether or not he has been among the main savers for his old age, the amount will be made up to £78. The individual will receive that amount whether or not he has paid for it.

Baroness Hollis of Heigham: My Lords, as my noble friend knows very well, the policy behind the minimum income guarantee seeks to address the poverty of those pensioners--mainly older women, including widows--who, by virtue of their domestic and caring responsibilities, have not been able to enter into either a SERPS or occupational pension while in the labour market. They have not had the advantage, which future generations of women in that situation will enjoy, of entitlement to the state second pension to float most of them off MIG in future. I hope that my noble friend accepts that description.
	Pensions by their very nature are a long-term issue. We have introduced MIG to give extra help to those of today's pensioners who have been unable to save. The need for this extra help will be progressively reduced as the benefits under S2P start to accrue. Many of the lower paid will see a boost to their pensions within 20 years or so. For example, someone who retires in 2025 with earnings of just £6,500 for a full working life will be lifted above MIG by receiving £18 a week more than he would have received under SERPS. The position of couples under S2P is even better, because MIG for a couple is not twice what it is for a single person.
	As I said when we debated this matter previously, without our pension reforms one in three pensioner householders would have to rely on MIG by 2050. Our reforms will reduce that proportion to one in five. We shall lift over 2 million pensioners off MIG as a result of our changes. That is our response to an inherited situation whereby a wide range of people--low earners, carers and disabled people--have no hope of a decent income in retirement. Stakeholder pensions and S2P will help people to build up good second pensions in their own right. The MIG provides help to today's pensioners, and will do the same for those currently approaching pensionable age who do not have time on their side to build up an entitlement to S2P. We believe that that balance is right.
	Under Amendment No. 69 some low earners would have their SERPS entitlement boosted. I understand the thinking behind the amendment. It recognises that low earners are a group who have benefited least from SERPS and therefore seek to do a swap, as it were, between entitlements. But I do not believe that the way to address the problem is to tinker with entitlement which has already accrued in a way which is partial and unfair. For example, the amendment would not benefit those other groups which S2P is designed to help--carers and long-term disabled people--who have not accrued entitlement under SERPS. It would be unfair to existing pensioners who would be unable to benefit. People with the same earnings in the same year would have the SERPS entitlement calculated in entirely different ways. There would be little gain in the short term because those reaching pensionable age soon after the introduction of S2P would have only a few SERPS years enhanced. Even with that boost, many low earners under SERPS would not have a pension sufficient to keep them above MIG.
	The fact is that SERPS is such a poor deal for those on low earnings--which is why we are reforming it--that even this boost would give limited advantage to only a few. That is why in S2P not only do we treat low earners as if they had earnings of £9,500--even if their earnings were £3,500, £6,000 or £7,000 they would get a pension on the basis of earnings of £9,500--but, unlike the noble Lord's amendment, we double the accrual rate on those earnings from 20 per cent in SERPS to 40 per cent in S2P. It is the combined effect of those two measures--the assumption of earnings of £9,500 and the doubling of the accrual rate--which gives low earners in S2P a pension which is sufficient both to take them above MIG when they reach pensionable age and to keep them there for a significant number of years.
	The noble Lord's amendment does not increase SERPS entitlement to the level of S2P because it delivers the low earners boost only up to the level of £9,500 and does not tackle the issue of the double accrual rate. Further, his amendment would make the calculation of additional pension entitlement very much more complicated. The noble Lord will say that it is not beyond the wit of man to devise a way round it. None the less, any form of retrospection for one group alone--which is what the amendment would do--is not fair to others, and we believe that the operational complexities are mind-boggling. That is why we are directing resources instead through MIG where there is immediate need and introducing S2P to address longer-term need. I hope noble Lords will agree with me in that approach and that as a result the noble Lord, Lord Goodhart, will feel able to withdraw the amendment.

Earl Russell: My Lords, before the Minister sits down, perhaps I may, for the purposes of elucidation and clarification, draw the noble Baroness's attention to the wording in the Companion to the Standing Orders about interventions.
	There is no separate rule for interventions on Report. The rule that lengthy or frequent intervention is undesirable is common to all stages of our proceedings. The only thing restricted on Report is speaking after the Minister has sat down, which is to be confined to brief questions for purposes of elucidation. I hope that that may be of some assistance to the Minister and to the House.

Baroness Hollis of Heigham: My Lords, I take that point. None the less it is at Committee stage that we explore, discuss and debate in the sense of to-ing and fro-ing. Under the conventions of the House that is not what we do on Report.
	While I am happy to try to answer any point that arises, to engage in a lengthy debate in the course of a speech is, from my experience of the House, not Report but Committee procedure. Although taking interjections and interventions in the usual spirit of the House, I do not think that that is the same as introducing a format of debate into the process of Report stage. Such to-ing and fro-ing debate is Committee style, as I am sure the noble Earl, Lord Russell, knows and practises.

Lord Goodhart: My Lords, I was pleased that I had managed to draft the amendment in a style comprehensible to the experts on the subject.
	We have had an interesting debate. I recognise that the proposal would add a fair amount of complexity to what is already a very complex piece of legislation. Taking that into account, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart: moved Amendment No. 70:
	After Clause 32, insert the following new clause--
	:TITLE3:
	:TITLE3:AGE ADDITION
	. For section 79 of the Social Security Contributions and Benefits Act 1992 there shall be substituted--
	"Age addition.
	79.--(1) A person who is above the age of 75 and who is entitled to a retirement pension of any category shall be entitled to an increase of the pension to be known as the "age addition".
	(2) A person who is in receipt of a pension or allowance payable by the Secretary of State by virtue of any enactment or instrument (whether passed or made before or after this Act is passed), and who--
	(a) is above the age of 75, and
	(b) fulfils such other conditions as may be prescribed,
	shall be entitled to an increase of the pension or allowance, also to be known as the "age addition".
	(3) A person who is above the age of 80 and is in receipt of age addition shall be entitled to an increase in the age addition, to be known as the "further age addition".
	(4) Age addition and further age addition shall be payable for the life of the person entitled, at weekly rates to be determined by the Secretary of State in regulations."").

Lord Goodhart: My Lords, this amendment is what I might describe as our flagship amendment. It is less technical and covers a broader field than Amendments Nos. 66, 67 and 69. Its purpose is to increase the basic state pension for those over 75, with a further increase for those over 80.
	The amounts of the further age addition are not specified in the amendment because they need to be varied year by year. My party will announce our own proposals regarding those amounts when our policy paper on ageing--it includes our policy on pensions--is published later this summer.
	We believe that these increases should be targeted on elderly pensioners. The elderly have more needs. They need more heating. They need more warmer clothes. They may have to buy more expensive food in local shops because they are unable to travel to supermarkets and return with a heavy load of shopping.
	Many present pensioners over the age of 75 do not have occupational pensions as good as those of younger pensioners. Moreover, occupational pensions are always likely to mean that younger pensioners will be better off than older pensioners, particularly in cases where the pensions are based on final salaries and those salaries have increased as a result of the general increase in earnings.
	We recognise that there are demographic reasons which make it excessively expensive to go back to restoring the earnings link for all state pensions. But an increase in pensions for those aged 75, and 80 or more, would be much cheaper and would benefit directly those who suffered most from the absence of the earnings link.
	The noble Baroness has said that the best way of helping the poorest pensioners is through the minimum income guarantee. She said in Committee, and will no doubt say again, that the income differences within age cohorts are much greater than the differences between them. That is obviously true, and I have never sought to deny it. That argument strongly favours a minimum income guarantee. But its logical conclusion is that the state pension should be abolished as a universal benefit for all contributors and the money should be diverted into a still higher MIG.
	The real question is: what is the right balance between flat-rate universal pension benefits and income-related pension benefits? We believe that the Government have gone too far--or certainly, if matters continue, will soon have gone too far--in the direction of income-related pensions.
	It is a fact that workers have been led to believe, and many no doubt still believe, that the national insurance contributions they pay will be used to pay for their own pensions. That, of course, is not true. Current workers are paying for their parents' pensions and, in due course, it is their children who will pay for their pensions. But whether or not that is the case, they believe--I think rightly--that contributions that they have paid give them a right to be treated fairly: that there is the inter-generational obligation of which the noble Baroness, Lady Turner of Camden, spoke in the previous debate.
	If pensioners who are not entitled to MIG see the MIG climbing more and more above the basic pension that they themselves are receiving, they will feel cheated out of what they have earned from their own contributions, and will rebel. No government will get support for MIG if pensioners just above the MIG level feel that they are being treated unfairly. That is what the Government need to realise.
	With hindsight, it might have been better to have a system in which pensions were paid for out of taxes and the National Health Service was paid for out of national insurance contributions. Indeed, it probably would have been better. But of course, it is far too late to think of that; it would be impossible to reach that position now.
	I believe that our proposal for a general increase for older pensioners will be seen as a fair alternative to full index-linking. But if nothing is done, pensioner anger, shown in the reaction to last year's 75p increase will grow, and grow further.
	There is another factor. The state second pension will be earnings-linked up to state pension age, but RPI-linked thereafter for any particular pensioner. The state second pension will be flat-rate--partially so at stage 1 and wholly so at stage 2, when it will be based for everyone on a notional income of £9,500 or whatever is the uprated equivalent. It is an inevitable consequence, assuming that earnings continue to rise faster than prices, that S2P will always be smaller for older pensioners than for younger ones, unlike the basic pension, which is the same for everyone and indeed has been increased by the immensely generous sum of 25p a week for those over 80. The effect of that will be that it will also force many pensioners into reliance on the minimum income guarantee late in their life, after they have been in receipt of pensions for perhaps 10 or 15 years. I believe that the fact that older pensioners will receive less than younger ones when both are on a flat-rate pension, and the fact that many pensioners, as they reach the age of 75 or 80, will find themselves having to rely on MIG, will make S2P completely unacceptable.
	The noble Baroness may ask, therefore, why we do not link the age addition to S2P rather than the basic pension. That would certainly be cheaper because it would exclude higher earners who opt out of S2P but who are still entitled to the basic pension. That is, indeed, a fair point. If the noble Baroness were to offer to add age additions to S2P, I should promise on the spot to accept that as a fair compromise. However, I doubt that the noble Baroness will do so.
	We believe that Amendment No. 70 proposes the minimum amount which is essential if public support for the present pension system is to be maintained. I beg to move.

Baroness Hollis of Heigham: My Lords, the core of this amendment, a version of which was moved in Committee, is based on a reading of pensioner poverty which I do not believe is accurate. It assumes that the basic determinant of pensioner poverty is the age of the pensioner. Therefore, the response of the Benches opposite is to increase the age-related additions.
	It is certainly true that pensioner incomes tend to decline with age. However, the difference between the incomes of older and younger pensioners, which is what the amendment addresses, is, as the noble Lord acknowledged, much, much less than the difference between the incomes of the poorest and best-off pensioners within each age bracket.
	Perhaps I may summarise the issue. On average, age reduces the income for a couple, whether they are aged below or above 75, by approximately £20 a week. A couple over the age of 75 will have on average an income of approximately £20 less than a couple aged under 75. The amendment of the noble Lord, Lord Goodhart, would seek, perfectly properly, to address that problem.
	However, by no comparison is that discrepancy in the same league as the inequality within each group, age for age. Therefore, the difference between the poorest fifth and the richest fifth, whether they are aged below or above 75, is approximately £250 or more, not £20. That is what MIG addresses and what the noble Lord's amendment leaves unaddressed. He addresses the minor problem. However, because it is a minor problem, the amendment would pass most of the money to those for whom age-related poverty is not an issue. It leaves unhelped those for whom poverty is not age related. He addresses the tiny part of the problem, which is poverty associated with age, and neglects poverty where it occurs among younger pensioners. We address real poverty at whatever age it occurs because all MIG money is spent on the poorest.
	My second point is that the feasible levels of age addition would do little to combat poverty, even among older pensioners. Were we to accept the noble Lord's amendment, an age increase of £5 for 75 to 79 year-olds would lift 50,000 pensioners in that age group off MIG, but 200,000 would remain on it. An age-related addition of £10 at 80, which is higher than the £7 proposed by the noble Lord, would lift 100,000 pensioners over the age of 80 off MIG but would leave 400,000 on it. In other words, age-related additions would still leave 80 per cent of pensioners who currently receive MIG still needing MIG. That is not targeting, as the noble Lord, Lord Goodhart, suggested; it is not even, in the words of the noble Earl, Lord Russell, "imprecise targeting"; it misses the target almost completely.
	The Liberal Democrats would fund their proposals by scrapping the state second pension, as set out in a paper by Mr Steve Webb. That would be equivalent to abolishing SERPS. It would mean withdrawing access to a state-funded second pension from those who do not have access to good occupational schemes. It would also mean ending the national insurance rebates that underpin savings in occupational and other private funded pensions. The foundation of saving for retirement would be seriously undermined and the long-term result would be more poverty rather than less.
	I hope that your Lordships will accept that the amendment would not work and would not do what the noble Lord thinks that it would do. It would merely give some money to older pensioners who need it, a lot of money to older pensioners who do not need it and nothing to poorer younger pensioners.
	The amendment is virtually irrelevant to pensioner poverty and the scale of the issues that we have to address through the minimum income guarantee and the House should reject it.

Lord Goodhart: The Minister's response was predictable--indeed, I predicted it when I moved the amendment. Let me get out of the way the issue of the paper by my honourable friend, Professor Steve Webb. My party's policy is to maintain a basic pension that includes age additions for older pensioners. We would top that up not with the excessively complicated S2P, but by requiring everybody to contribute to a compulsory stakeholder pension, with contributions from employees and employers.
	However, that is a debate for another day. We are talking about the S2P. If we can influence matters before the S2P comes into effect, we would prefer to do without it and move to the system that we propose. However, once the S2P has started to operate, we shall be faced with a fait accompli and we might well feel it necessary to carry on with it.
	To return to the main issue, of course I entirely accept what the Minister said about the difference between rich pensioners and poor pensioners within the same age group being far greater than the difference between the age groups. That is an obvious truth. However, she did not answer my point that in fixing the level of pension one has to take account not just of how to help the poorest pensioners--which must unquestionably be an important aim--but of how to maintain public confidence in and support for the whole pension system. That cannot be done unless the Government give more than they currently propose to those who are above the MIG level. We propose to achieve that through age additions. We shall shortly hear from the noble Baroness, Lady Castle, in favour of a considerably more expensive scheme to link the state pension to earnings.
	The Minister did not answer that point. We feel strongly about this, but it would be ridiculous to vote on it at 10 past 10 at night. However, we are very likely to have to return to the issue on Third Reading. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden: moved Amendment No. 71:
	After Clause 37, insert the following new clause--
	:TITLE3:CATEGORY B RETIREMENT PENSION: RATE AND REVIEW
	(" . With effect from 1st April 2001, the weekly rate of the category B retirement pension specified in Part I of Schedule 4 of the Contributions and Benefits Act shall be increased to the level of the Minimum Income Guarantee.").

Baroness Turner of Camden: In moving this amendment in the name of myself and my noble friend Lady Castle, I shall speak also to Amendment No. 72, with which it is grouped.
	The first amendment deals with the minimum income guarantee. The Government have admitted that it is simply not possible to live on the basic state pension. On 3rd April, my honourable friend the Minister in the other place, Mr Jeff Rooker, said:
	"We know that the basic state pension is not enough".
	So the Government have introduced the minimum income guarantee at £78 for a single person. It is still not as much as the basic state pension would have been had that pension been increased in line with the wages index which was the original intention under the Castle Plan introduced by the last Labour government. That would now be in the order of £98 or £99 per week.
	Nevertheless, it is an acceptance by the Government that that is a minimum income for everyone, and that any single person between the ages of 60 and 74 cannot be expected to live on less than £78 per week. But there is one drawback. It is means tested. As we know, many people, particularly older ones, simply will not go through what they regard as a humiliating experience, filling out forms, declaring their resources, meagre as they may well be, in order to claim that money which the Government acknowledge is really theirs by right.
	The Government are now investing thousands of pounds, or perhaps it is a million or so--I do not know what the figure is; perhaps the Minister will enlighten us--on persuading older people that they really should claim the MIG. I do not know how successful that campaign has been. But if the Government were to treat the MIG as the level applicable to everyone and then build up from there, it would be a major step towards dealing with pensioner poverty. I hope that the Minister will not again tell the House that there are lots of well-off pensioners. There are certainly more older people who have occupational pensions--we should applaud the success of the occupational pensions movement--but as I have said repeatedly in this House, many of those pension schemes are based on the assumption that they top up the basic state pension.
	The noble Baroness has described the basic state pension as the building block. But it is crumbling, as we all know. It needs to be radically improved. Everyone agrees with that, even noble Lords opposite. Of course, better-off pensioners will lose improvements through taxation. I am a pensioner. I have an occupational pension. I lose my entire state pension and more to the Inland Revenue. It is given with one hand and taken away with the other. I do not complain about that. We are not talking about very wealthy people. They are just people who have put aside money during their working lives in order to save for the future. I do not want my situation to be used as an excuse not to pay a decent basic pension to other pensioners, most of whom believe very strongly that having worked all their lives--and let us remember that this is the war-time generation who believe that they made sacrifices at that time--they are entitled to a better deal.
	I hope that the Minister will not again talk about how well off many pensioners are. It so happens that I have recently had sent to me a submission by an organisation representing Post Office, BT and Civil Service pensioners generally. It says:
	"There is a widespread but erroneous perception that all occupational pensioners are comfortably off on large index-linked pensions".
	But it says that:
	"The majority, nearly 60 per cent., of occupational pensioners represented by our organisations have second pensions of less than £5,000 per year, equating to less than £100 per week. Indeed, between 30 per cent and 40 per cent have occupational pensions of less than £3,000 a year or less than £60 a week".
	Strangely enough, it says:
	"In the Civil Service, some 60 per cent of widows receive less than £40 per week in occupational pensions".
	It simply is not true that there are lots of well-off pensioners on occupational pensions who would benefit if we were to put into operation what is proposed in the two amendments.
	I turn to Amendment No. 72, which again deals with the earnings link. Here, we are talking about social insurance. The welfare concept with which we have lived under successive governments, not just Labour, until relatively recently, accepted the whole concept of social insurance. The result was that we had a system which provided pensions for all, at least at a minimum level, and everyone paid towards the cost. The Government's present policies drive a coach and horses through that concept. The noble Baroness has repeatedly told us that to increase the basic pension for everyone on the lines indicated in the amendment would mean that richer people would get something which presumably they should not. They would, of course, have contributed to it.
	If I have a policy with the Prudential, I do not expect the company to say, when pay-off becomes due, "You can't have it; you are better off than you should be". Any insurance company taking such a line would quickly find itself in court and there would be a massive exodus of policy holders. Unfortunately, that is not possible for the millions of pensioners who believed that in paying their national insurance and taxes for over 40 years they were at least ensuring that they would not sink into dire poverty.
	We welcome what the Government have done by way of winter fuel payments and free television licences. But we should talk to pensioners. What they want is cash flow; some real improvements in income. They want such improvements without having to submit to the indignity, as many of them see it, of means testing. Everyone knows how upset and disillusioned pensioners are as a result of the insulting, as they see it, 75 pence increase. The Government now have an opportunity to repair the damage which that proposition has done. It is not only older people who feel upset about it. Their families are upset too on their behalf. I hope now that the Government will promise to do something about the basic state pension. I beg to move.

Baroness Castle of Blackburn: I support the amendment moved by Lady Turner. I shall speak to Amendment No. 72 which, as was explained to the House, deals with the restoration of the earnings link. I say "restoration" advisedly. It is not some new, wild revolutionary idea we are espousing, but part of a pension scheme which the Labour Government of 1974 believed was sustainable, honourable and right.
	Like Lady Turner, I should like to know how many people responded to the great effort the Government launched to persuade the reluctant poor pensioners to accept means-tested benefit of MIG. I can, however, tell her what the cost is. It was announced in another place, earlier this week, by the Minister, Jeffrey Rooker. So far, £15 million has been spent on this persuasion exercise. We were told earlier that it would be a marvellous effort; there would be TV advertisements, telephonic approaches and everything possible would be done to ease the admitted pain of applying for means-tested benefits.
	I do not know how many Members of the House have seen Dame Thora Hird contributing one of the television appeals. It did not last very long. I have to say that I did not feel she had her heart in it. It was not the robust Thora Hird we all loved and rejoiced in. She said, "Well, you know, you really might be entitled to a bit more". Of course her heart was not in it. I cannot see her enjoying applying for minimum income guarantees. Nor would anybody who has any self-respect enjoy doing that.
	I wonder how many Members of this House are applying for the minimum income guarantee. Until they do, they had better not throw away easy phrases about helping the poorest pensioners. As I said before, the very label is a contradiction of all I thought our movement stood for; namely, to lift everyone to dignity and to independence. When you come to think about it, the whole principle of the means tested income guarantee is that it is the pensioners' equivalent of a glass ceiling. Women will understand that perfectly well because it says specifically, "Earn a bit more, get a bit more independence and whoosh, we will put a ceiling on what you can earn". That is effectively it. I have had cases brought to my attention when retired people have been reluctant to take on a little bit of a job because it might lift them out of the minimum income guarantee if they were honest enough to declare what they had been managing to pick up.
	So it is the very opposite of the sort of society which I thought our movement believed in. I must say that I listened with great respect to the speech of Lord Goodhart. I am afraid I think that he has the wrong answer to the problem he set before us. But it was refreshing to hear someone make a case for the importance of sustaining the value and the accompanying rights of the basic state pension scheme. I have been waiting to hear the Minister make as passionate a case in support of it, yet I have not. It has all been about just helping the poorest pensioners, about targeting, picking them out, making them obvious. For instance, in my early days in the Labour movement we campaigned for free school meals. The kids who benefited from them had to be protected from being shown as those who were so poor that their parents could not pay for their school meals. And how we hated that.
	Now, I wonder whether the Minister has begun to realise the extent to which more and more people are realising the growing gap between what the earnings-related contribution brings into the fund and what the basic state price index pension takes out of it. The latest example of the people on whom that has dawned has been issued this very week by the Select Committee on Social Security. I do not know whether the Minister has yet had time to read it, but she will remember that, as regards the present way of financing the basic state pension, contributions earnings related and basic pension flat rate, and of course price indexed, the Select Committee says it is bound to create a steadily increasing surplus in the National Insurance Fund. And everyone knows that it is nonsense to say, "The earnings link was quite right when you introduced it, Barbara. We think that was very laudable of you, but of course we cannot afford it". That is not true. The Select Committee itself has said in its report--I have some of the quotes here but unfortunately I cannot read them to the House--that it was worried by this growing surplus which has come out of the pockets of ordinary people in this country through their contributions. They have paid; but they are not enjoying!
	Some of that surplus, to this Government's shame, is being devoted to cutting the employers' contribution. In fact, our own Chancellor of the Exchequer, following the example of the previous administration, gloried in the fact that, in order to offset the cost to business of the climate change levy and the aggregates levy he was introducing, he would further reduce the employers' contribution to the National Insurance Fund. He told the House proudly, "Employers will be paying £1.35 billion a year less into the National Insurance Fund". It is a strange time when the Chancellor is boasting in another place of cutting the contribution to the National Insurance Fund, and our Minister is saying it must be sustainable.
	The Select Committee faced that point in its report. It pointed to the accumulating surplus and said that it will continue to accumulate as long as the present system of financing our pensions continues. I wish I could read the figures to the House; at this time of night I cannot carry that lot in my head. The committee said that there would be this mounting surplus in the future, but if we wanted a double guarantee, we could increase contributions.
	It may be said, "That would be a terrible burden. We will lose votes". But the Select Committee said that the increasing burden would be extremely light, and in making that recommendation it quoted the deputy government actuary who gave evidence to the committee and worked out the sums. It was said that around a 3 per cent increase in contributions would be needed, if we restored the earnings limit, up to the year 2011, and taking it up to 2060 it might be a 7 per cent increase. But in that period earnings are not standing still. By spreading it out at, say, 1 per cent a year, people who are receiving the rise in earnings will not notice it. Or at the very least, they will not object any more than they objected when I increased the contribution by 2 per cent of earnings when I introduced SERPS, the earnings link and the annual upratings, which had never been enforced by law before, and the other benefits of the 1974 Labour government.
	I remember the Tories at that time saying, "There will be such an outcry. Look at that increase"--mind, it was shared between employer and employee--"People will never stand for it". They were astonished to find that there was barely a murmur. Because people will pay for those things that they want, and they want a guarantee of security in old age.
	Any Member of the House who wants to vote on this issue should first read the Social Security Select Committee report.
	I cannot go on too long at this time of night. However, I believe that there is a growing public opinion in this country which is behind the arguments of the noble Lord, Lord Goodhart, and the arguments which the noble Baroness, Lady Turner, and I have put forward for years. There is a growing anger at the widening gap between what people pay in and what they get, and that conclusion of the people is growing.
	If at this time the Government choose to take £1.35 billion out of the National Insurance Fund and say that all they can afford is to help the poorest pensioners, provided that they fill in the necessary forms and do not earn too much or say too much, it can only mean--and I say this advisedly--that this Government have a long-term pensions policy to destroy the state insurance scheme. That would be the consequence. If the Government do not want us to deduce that it is also the desire of the Government, then we must have a better response from the Minister than we have had so far.
	I urge the House not to lose touch with public feeling. The public do not want targeting. They do not want labels which say, "You are the poorest" or "You are in the queue for three meals". They want the dignity for which they thought they were contributing.
	Finally, I say to the Government that I want them to succeed, that I want them to continue to succeed and that I want them to win the next election. But the Conservative leader, William Hague, is no fool. He may occasionally sound it, but he is not. He has put forward the idea of taking the fuel allowance and the TV licence allowance and turning them into a cash increase on the basic pension. In my opinion, that would be an absolute vote winner, except that in his case it is a once-and-for-all increase. The government spokesmen have been very good at pointing that out, and I would be the first to shout it from the hustings. The Government's biggest defence would be to say, "Whatever pension we introduce, we will keep abreast of rising national prosperity". I believe that one day, when the Government have perilously been faced with the voting apathy of pensioners, they might perhaps recognise that I and Lady Turner, and others, have been right all along.

Earl Russell: My Lords, the noble Baroness, Lady Castle, should feel flattered. It is not very often that we see at least 50 people on the Government Benches.

Lord Graham of Edmonton: Fifty-four.

Earl Russell: My Lords, I am grateful to the noble Lord, Lord Graham of Edmonton, for the correction. I am glad for the confirmation that my mathematics are not that far out either. Fifty-four people on the Government Benches have come in to listen to a single speech by a single Back-Bencher.
	The noble Baroness, Lady Castle, deserves that honour. She has made an extremely powerful speech. I am grateful to her for her compliments to my noble friend Lord Goodhart. I would like to return those compliments in the same measured terms. It gave me great pleasure to listen to a speech which showed the same concern that we feel about the basic state pension as a right. However, as she said of my noble friend, we feel that she has not quite got the answer. What we have in common is that we both think that there is a question which needs an answer. But, in the end, whether or not we think it irrelevant, the voters think it in very large numbers.
	I spent quite a long time in Romsey; I spent even longer telephone canvassing. I shall not soon forget a half-hour argument with a lifelong Labour voter who told me that he was never again going to vote for anyone. At the end of that conversation, he said, "We will vote for you this time, but, if you let us down, God forgive you because I won't". I have paraphrased in order to make his remarks acceptable inside the Chamber.
	I was in Tottenham last Tuesday and I heard the same response. I shall not prophecy what sort of news we might hear in an hour's time or thereabouts, but I read in today's Evening Standard a prophecy, which appears to emanate from Millbank, that the poll may be even lower than the 19 per cent scored in Leeds Central. My own experience gives me nothing that leads me to dispute that. We live in a democracy; we must listen to our masters.
	When it was decided that the basic state pension was going to be uprated in line with prices, we created a situation where it was in danger of withering. It is about time we took on board the fact that what is true of the basic state pension also applies to income support. Indeed, the need in income support may be greater in some ways than the need in pensions. That means that the problem is greater, but it also means that the potential costs of a solution are greater. In effect, it is a matter of double or quits: it doubles the stakes and makes the problem that much more difficult.
	I recall the very constructive debate we had on the matter during the Committee stage of the Welfare Reform and Pensions Bill last Session. The Minister generously agreed with me then that, as a consequence of uprating in line with prices, it was necessary, "as resources allowed"--we agreed on those words--to uprate from time to time, and when possible, fairly well above the level of prices. I believe that the Minister will find that I have recollected her words accurately. This year resources did allow, but the Chancellor of the Exchequer did not take his opportunity. He has already lived to regret it. If there had been a decent uprating this year, and one which was fairly significantly above the level of prices, the problem might have been diffused. That has not happened. The voters will not soon forget.
	The sort of anger I faced is directed against the whole of our profession. With respect, I do not think that Mr Hague has the answer to the problem. The redistribution that he suggests might have been a perfectly sensible way of tackling such matters if he had not tried to call it an increase. It is not an increase, except by the 42 pence calculated by my honourable friend Mr Webb, and that comes below the Government's 75 pence. Incidentally, if the noble Lord, Lord Higgins, is to speak later in the debate--I imagine that he will--I hope that he will tell us how the Conservative Party means to find the £90 million from the finances of the Social Fund, which I have always regarded as one of the most cash-strapped parts of the whole social security system.
	Therefore, we need increases above the level of prices, as resources allow. That is not to say necessarily that regular increases in line with earnings will be sustainable. Here is where we part company with the noble Baroness, Lady Castle. You may calculate the figures for a short period of time. The difference each year is small. Here, I think, is where Mr Darling was completely mistaken in denying my argument that what we are offering here is imprecise targeting. An annual uprating uses a machine-gun. It has a repeat rate of fire. If you get into the target area with the first bullet, you will get a good deal closer over the next 10 or 12. So, the catching up goes on.
	If you are uprating by earnings, over the length of a Parliament the increase may or may not be sustainable. But the earnings link means a commitment, year in, year out, in good years and in bad, in fat years and in lean years, to uprate above the rate of prices. It is that continuing commitment over a generation which we on these Benches feel a great deal of doubt about sustaining.
	I listened to what the noble Baroness, Lady Castle, said about the surpluses in the National Insurance Fund. The surplus this year is indeed considerable. It would not have been difficult to use some of it for a significant increase this year. But belief in the continuation of future surpluses involves an element of faith. I have not forgotten the first amendment on which I had to consider whether to seek to divide the House from this Front Bench. It was on the then Social Security Bill of 1989. Those were the years of hubris. The government had a healthy surplus in the National Insurance Fund. They believed that it would be there for ever. They introduced a provision to end the Treasury supplement to the National Insurance Fund. They believed that it would never be needed again. I decided not to seek to divide the House but I said that I expected to live to see the provision reversed, as, in the gloomy Budget of 1993, it duly was. Even I had not expected it quite so soon.
	The National Insurance Fund responds extremely quickly to economic fluctuations--in fact, on occasion, even more quickly than the Government Actuary expects. It goes up very fast in a period of recovery and goes down extremely fast when that recovery comes to an end. No economic recovery lasts for ever. If the Chancellor of the Exchequer has discovered a way of making it so, he has discovered the philosopher's stone. He is not the first to make that claim, but he would, were he to succeed, be the first in all recorded history to make it good. That would surprise me.
	We on these Benches feel a great deal of doubt about the long-term sustainability of a commitment to the earnings link. On the other hand, we feel a great deal of doubt about the long-term sustainability (in the eyes of the voters in a democracy) of the present system of uprating by prices without any further increases, as resources allow. It is no good talking about MIG. First, we are not convinced about the means of delivery of MIG. On the previous occasion that we discussed this matter in Committee I grant that the Minister gave a powerful, well thought out answer. She has thought of a great many ways of encouraging people to apply for money under MIG. What she has not got over is the sense of entitlement felt among voters who believe--as both my noble friend and the noble Baroness, Lady Castle, have said--that, because of their own contributions, they have a resulting entitlement to a pension. That is deep seated in the minds of voters. As Angela Rumbold once said of child benefit, it is deep in the culture. Facts and Ministers will not eradicate it. So if they see MIG as being a matter of charity--as do a great many of the voters that I have talked to in recent weeks--it will not be enough to satisfy them; the voters believe that they have a right. If they do have a right, our right to be here at all is contingent on what they say. We must take that on board.
	We must have a significant measure of progress. My noble friend has put forward the right answer in spite of all the criticisms that have been made. I shall address those criticisms later. I am not addressing them now because the Minister replied immediately to my noble friend and they would be wide of the present amendment; but the Minister will hear me address them.
	I hope that the Minister will listen to one or other of us--or else come up with a real, significant, immediate increase. If it is not immediate, the voters will make her pay for it.

Baroness Park of Monmouth: My Lords, I am not an expert in any of these matters. I am a pensioner and, like the noble Baroness, Lady Turner of Camden, I pay all my pension back in tax. So I have no direct interest in that way.
	I feel very strongly about this issue. I do not know how the objective can be achieved--I recognise that all the pundits say that there is not the money to promise it forever--but something has to be done quite urgently now. There are a lot of people out there--not just the old but their families too, who will grow old later--who are watching us to see whether we care enough about them. As the noble Baroness said, the whole issue is one of dignity and self-respect. The Government say a lot about inclusiveness; these people are being excluded--and they feel excluded.
	It is absolutely vital that we should also recognise that, if one has independence and self-respect, it has a remarkable effect on, for instance, one's health. We could save a lot of money from the health budget if people were more independent, more able to look after themselves, more able to pay to look after themselves, and had the independence, dignity and self-respect that is part of health.
	There are strong arguments for doing something. Whether it will be what the noble Baroness wants I do not know--I shall vote for her anyway--but it is absolutely vital that people do not neglect the fact that there are a lot of angry, resentful people out there who are losing their faith in all politicians--and that matters to all of us. We have to think about that as well.

Lord Davies of Coity: My Lords, without any risk whatever, I venture to suggest that there is not a Member of the House who does not admire the passion, the conviction and the sincerity with which my noble friend Lady Castle prosecutes her case in respect of restoring the earnings link. About that I make two points.
	First, the arguments have been fully canvassed in this House time and time and time again. The chance of anything new being introduced is very unlikely. Secondly, if an independent observer came here and listened to the way in which the arguments ebb and flow, he would probably get a distinct impression that those who were supporting the restoration of the earnings link were for pensioners; and that the Government, who were defending their proposals, were against pensioners. That is not the case. It is far from the truth. The Government are concerned about pensioners, but their strategy and approach is somewhat different to the one advanced by my noble friend.
	As my noble friend Lady Castle knows, governments are required to take some very difficult decisions on occasions. As a Minister of the Crown herself, she will know that she had to face some very difficult decisions during her period of stewardship--which, of course, was a very admirable one.
	Here we have a situation where, on the one hand, we have heard arguments in favour of restoring the earnings link for pensioners, an earnings link that was abandoned a long time ago. On the other hand, we can approach this by raising the minimum level of pension income so that it is equal to that of the minimum income guarantee.
	Where do the Government stand? As I see it, initially, immediately and for the foreseeable future, the Government wish to devote resources to those greatest in need. That seems to respond to an age-old socialist principle: from those according to their means to those according to their needs. In the long term, the Government want to tackle the real problems of our pension system to ensure that pensioners living through this new century will receive pensions that will be part public and part private. Above all, however, they will be adequate pensions and will be of realistic benefit. It may be thought courageous or even revolutionary to implement such massive changes, but in the long term, I believe that pensioners will benefit from the proposals that the Government have put forward.
	I give noble Lords advance notice of what will be announced in the newspapers on Saturday of this week. I shall reach the age when I will attract an old age pension. I know that my old age pension will embrace an element of graduated pension and, perhaps more importantly, a larger element of SERPS. However, if I thought that I was going to receive additional payments to that pension which, at the same time, would mean that worse-off pensioners in either relative or absolute terms would not receive an extra amount that they would otherwise receive, I am afraid that I would feel a measure of guilt.
	On balance, I think that the Government are going in the right direction. I certainly hope that, at the end of our debate, the House will give the Government the support they require.

Lord Warner: My Lords, it is with some reluctance and trepidation that I rise to question the wisdom of Amendment No. 72. In the mid-1970s I worked closely with my noble friend Lady Castle, when she was the then Secretary of State for Social Services. I have a huge admiration for her abilities. In those days we both believed strongly in linking upratings of the basic retirement pension to increases in the level of earnings. However, I hope that she will accept that, in the spirit of friendship, I suggest that the world has moved on since that time.
	I am not sure that we can now move "back to the future". Pinning pensions upratings to prices has been carried out for around two decades, as a result of the actions of the previous government. This Government have had to tackle the problem of pensioner poverty from the situation as it is, not as they would have liked it to be; namely, as if an earnings link had been in place over the past two decades. Through special measures, they have targeted help--in my view, rightly--on those pensioners in the greatest need. Some of those measures are tax free, which would not be the case if we increased the basic pension. The Government have tried to implement measures to help those in the greatest need. I believe that that is totally consistent with the principles of the Labour movement.
	I recognise that this has not been popular with many pensioners. However, to correct my noble friend Lady Turner, we should bear in mind that we are not operating funded state pension schemes.

Baroness Turner of Camden: My Lords, I did not say that.

Lord Warner: My Lords, with all due respect, my noble friend implied that an analogy could be drawn between the state pension and funded private insurance schemes. The reality, however, is that the people who comprise the present working population are in fact paying for today's pensions. Before we commit future generations to certain levels of pension obligation, we must be confident that those can be sustained.
	I believe that the present Government have acted in the best interests of the poorest pensioners. The measures they have taken have increased the benefits going to the poorest pensioners to the tune of something in excess of £2 billion more than if they had increased the basic state pension in line with earnings since 1997.
	In those circumstances, I am inclined to keep the present flexibility of more for the poorest pensioners rather than tie ourselves to the rigid formula in Amendment No. 72.

Lord Higgins: My Lords, I join noble Lords who have suggested that the noble Baronesses, Lady Castle and Lady Turner, put forward the case with which we are familiar with the greatest eloquence. It is remarkable that they have immediately picked up the report of the Select Committee of another place, The Contributory Principle, published only on 7th June. It raises important arguments in relation to the points put forward.
	My party's position is clear and at this hour of the night I do not propose to bore the House by repeating it. Unfortunately, I am not at this moment in a position to announce a sudden change of policy. None the less, perhaps I may comment on our recently announced change with regard to combining the Government's various gimmicks on winter fuel payments, television licences and so forth. Because it saves some £40 million a year in administrative charges, it enables a modest increase to be made. Perhaps I may say to the noble Earl that it was not presented as a massive increase; it was a consequence of the action we took. Although it is, as the noble Baroness, Lady Castle, pointed out, a once and for all increase, it raises the basic level on which future increases are made. Therefore, to that extent it is not a once and for all increase.
	Not one of the criticisms made of the proposal put forward by Mr Hague a few weeks ago was valid. There was a great deal of immediate reaction from the Government. Every single point they made was based on a misunderstanding of what we were proposing. I speak as one who for 30 years represented one of the "oldest constituencies" in the country. It is said, "They came to Worthing to die and they forgot what they came for." I have to tell the House that the proposals for incorporating into the basic pension the various government measures--

Earl Russell: My Lords, I apologise to the noble Lord, Lord Higgins, for intervening, but before he leaves the subject of his party's policies, is he in a position to answer my question about how it proposes to find a £90 million saving in the Social Fund?

Lord Higgins: My Lords, no, not at this stage. However, if the noble Earl looks at the detailed press release issued at the time, he will find a satisfactory answer.
	Perhaps I may repeat what I said a moment ago with regard to the speech of the noble Baroness, Lady Castle. She referred to the Select Committee report but did not quote the relevant paragraph. Paragraph J of the recommendations states:
	"We concluded that unless there is a significant change of policy there is likely to be a growing surplus in the National Insurance Fund as a result of benefits being linked to prices and contribution income based on earnings rising at a faster rate".
	We agree with the Secretary of State that any use of the surplus must be sustainable in the long run, but it goes on to state:
	"The Government Actuary's figures show that in order to pay for an earnings up-rated benefit the combined contribution rate from employers and employees would have to rise by 3.2 percentage points"--
	the figure mentioned by the noble Baroness--
	"by 2021 and by 7.6 percentage points by 2060".
	The Select Committee goes on to recommend that the Government should consider that as one option of funding improvements in benefits. Since this is an important and, in many ways, authoritative report, based as it is on the figures of the Government Actuary, I hope that in reply to the noble Baroness, Lady Castle, the Minister will comment on that particular aspect of the matter.

Baroness Hollis of Heigham: My Lords, it is late. Having spent 50 minutes on this matter--this debate is a repeat of one held at Second Reading and at Committee stage--I am sure that noble Lords want me to be as brief as possible.

Noble Lords: Hear, hear!

Baroness Hollis of Heigham: My Lords, that may be the most enthusiastic cheer that I receive all evening.
	I deal first with Amendment No. 71, spoken to by my noble friend Lady Turner, before I turn to the bigger amendment, if I may so describe it, spoken to by my noble friend Lady Castle. Amendment No. 71 would increase the rate of basic pension received by a couple where the woman relied on her husband's contribution record to the level of the minimum income guarantee for a pensioner couple. In subsequent years the Secretary of State would have the option to increase that pension in line with earnings.
	My noble friend will be aware that at the moment there are two ways in which a married woman can qualify for a state pension. Like everyone else, she can pay enough full rate contributions herself. As an alternative, when her husband retires she can receive a pension on his contributions if she does not herself satisfy the contribution conditions. This reflects the operation of the national insurance scheme prior to 1978, when a married woman could choose to pay a lower rate of contribution--I was one--and receive a pension based on her husband's rather than her own contributions. I and many others like me made a deliberate calculation to reduce the contribution and receive a lower return.
	Married men pay the same rate of contribution as single men and women and so the pension paid to a married woman based on her husband's contribution is, in practice, partly financed by the contributions of single people. I believe that it would be deeply unfair to increase the total level of retirement pension paid to a married couple on the basis of the husband's contribution. Why should a woman, who may have paid no national insurance contributions at all, or, like me, paid reduced rate contributions, receive an increased contribution for which she has not paid when other women, single men and married men who have also contributed throughout their working lives receive no such increase? My noble friend seeks to give that pension entitlement to people who have chosen to make a lower contribution, or, in some cases, none at all. If there is any merit in the contributory principle for which my noble friend has argued this evening, surely she will accept the truth of that proposition.
	I turn to Amendment No. 72, which would uprate the basic state pension by earnings. It has been debated at considerable length on previous occasions. I am sure that all noble Lords around the House tonight share the desire to tackle pensioner poverty. As was said by my noble friend Lord Davies of Coity, my noble friend Lord Warner in particular and other noble Lords, I do not think that this proposal is the right way to achieve that aim. The earnings link, as was pointed out by my noble friend Lord Davies of Coity, existed for a period of only four years between 1974 and 1979. In two of those years prices exceeded earnings. This was at a time when few people had a second pension to add to the basic state pension. Today, when we talk about pensioner incomes we look beyond the basic pension to the total income that pensioners receive.
	The basic, irreducible facts, boring though they may be, that my noble friends behind me have consistently refused to take on board are that, over the past 20 years since the earnings link was introduced and then disbanded, pensioner incomes have grown at a faster rate than any other broad group in the population. On average, the incomes of all of us of working age have grown by 38 per cent in real terms since 1979. The increase for pensioners has almost doubled from its base, rising by 64 per cent. As a result, their income increase has been substantial. That has happened despite the break with the earnings link, due largely to the impact of SERPS and occupational pensions. Compared with 1979, the real income of pensioners has grown by almost twice as much as the rest of us on average.

Baroness Turner of Camden: My Lords, that is not true.

Baroness Hollis of Heigham: My Lords, it is true. I am prepared to accept that my noble friend may wish to challenge me. I know she feels that that cannot be the case because, I acknowledge, she has personal experience of friends and acquaintances in particular circumstances. But these are official government statistics which have not been challenged authoritatively by anyone so far as I am aware. Pensioner incomes have increased by 64 per cent on average since 1979; the incomes of the rest of us by 38 per cent. That is the first point.
	The second and important point for our consideration is that that 64 per cent conceals the most appalling growth in pensioner inequality and, therefore, pensioner poverty. The top fifth has seen its income increased by more than double the amount of the bottom fifth. As a result, whereas the bottom fifth of couples in the 1997-98 figures has an income of £126 per week, the top fifth of pensioner couples has an income of £426--nearly four times as much. That is an increase in inequality which far exceeds any other inequalities in our society.
	That situation did not face my noble friend the former Secretary of State. Had it done so, I am confident that her response in 1979 would have been different from the response when she established SERPS and the earnings link. But that is the fact now. My noble friend's policies were right, decent and proper, and I would have been cheering her on in 1979, but not now.
	We have now inherited a situation in which the top fifth of pensioners has seen its income increase by nearly 80 per cent and the bottom fifth of pensioners by between 25 and 30 per cent, depending whether they are single pensioners or couples. That is far less than the rest of us.
	What do we do in that situation? Would restoring the earnings link which my noble friend Lady Castle wants to see tackle inequality? Would that reduce pensioner poverty? The answer is a resounding no. Restoring the link would cost an extra £1 billion net in 2000, and extra £7.5 billion in 2010 and an extra £24 billion in 2025. Every pound one puts on the basic state pension adds £0.5 billion to expenditure. But it is not the money question. The cost is not the main problem. The problem is that my noble friend's policy would do nothing to help the poorest pensioners. It would not help in the battle we think that we face: pensioner poverty and inequality.
	As my noble friend Lord Warner said, we have spent £6.5 million extra on pensioners in real terms in this Parliament if one includes the winter fuel allowance, the TV allowance, and so on. That is over £2 billion more than we would have spent on earnings uprating and over half of that has gone to the poorest pensioners. Under my noble friend's scheme, only one fifth of that money would have gone to the poorest fifth.

Baroness Castle of Blackburn: My Lords, I am grateful to the Minister for giving way. She said that the restoring the earnings link would do nothing for the poorest pensioner. She is surely aware that, if it had not been abolished by Lady Thatcher, today every pensioner would be receiving £98 a week--more than the minimum income guarantee of £78.
	It is a question of what path you follow consistently over the years. Would not she agree that what she is advocating is a consistent path towards the disappearance of the basic state pension? Does not she realise that that is the last thing that even the poorest pensioners want?

Baroness Hollis of Heigham: My Lords, my right honourable friends the Chancellor of the Exchequer and the Prime Minister have made it very clear that the basic state pension will remain an essential building block in pensioners' incomes. That is what we believe and support.
	My noble friend will understand that we are not back in 1981, or 1980, when the earnings link was disbanded. We are coming up to 2001; and, since the date when the earnings link was disbanded, the poorest pensioners have fallen well behind not only the median income of pensioners, not only behind the income of the better-off pensioners, but behind the incomes of all of us. The question, then, is whether restoring the earnings link is the right way to address the problem of pensioner poverty.
	A flat-rate provision, which is what the earnings link is (for a couple, it would have been £3.70 this year) would not help the poorest pensioners, because it would be deducted from their income support; and it would be barely noticed by the better-off. The choice is straightforward. You can give £3.70 to everyone--the poorest will not gain, and the better-off do not need it--or you can target the benefit on those who need it, and they will receive £18. So the choice is: £3.70 for all, or £18 for those who need it. That choice will not go away however much my noble friend wishes we were back in 1979--or 1978 perhaps, given the results of the election in 1979!
	There is a further point. What does my noble friend propose to do about those pensioners who currently need, and receive, £18 on top of the couple's basic retirement pension to take them up to the MIG level? An earnings link would give them £3.60, £3.70 or £3.80. What about the rest of the money? Is my noble friend saying that they would not receive the rest of the money, so they would be some £15 poorer than they are now? Or is she saying that they would receive the money, and that they would still need to be means-tested on top of the earnings link, but with less money to go into that means-tested, targeted top-up because the money would have gone to the rest of us? What is her choice? Either pensioners do not get the money--or they do get it, in which case they have to get it through the very targeting that she has deplored.
	My noble friend cannot have it both ways. She must address the fact that the amendment belongs to a society which I believe no longer exists. It belongs to a society in which income differentials between pensioners were very narrow, and where a flat-rate increase for all was a decent, right and proper way of helping pensioners by locking them into an earnings right. That society has gone. My noble friend has criticised, as have all of us on these Benches over the past 20 years, the policies of increasing poverty and inequality that have afflicted so many in our society. No group has been hit harder than pensioners. They are the ones who have suffered. The poorest 40 per cent of pensioners are the ones who have been left behind.
	My noble friend's amendments belong to 1979. They will do nothing for those pensioners. If all they receive is the earnings link, they will remain in poverty. If, on top of that, my noble friend recognises that they need to go up to MIG, they will still need means-testing, but she will have spent the money on people like me and others of my noble friends who do not need it, and those pensioners will not get the money they need. Those are the facts. In a society of inequality, we need to target help to reduce that inequality, not give the same to all--because if we do, we merely perpetuate the inequality into the next generation and the generation thereafter.
	I ask my noble friend to respect that fact and to withdraw her amendment. If she chooses to press the amendment, I ask the House not to support it.

Earl Russell: My Lords, one point which I hope the Minister will not find unhelpful and I am sure the House may find helpful is this. How many years of the earnings link would it take to raise the basic pension above the level of the MIG?

Baroness Hollis of Heigham: My Lords, I have no idea what the future rate of earnings is likely to be. It is an impossible question.
	I was about to conclude my remarks. I hope that I have persuaded your Lordships that while my noble friend's amendments, particularly Amendment No. 72, are a decent and honourable effort to address the problem that she perceives, I suggest in all humility that that is not the problem that we face. The problem that we face is one not only of pensioner poverty but of pensioner inequality. In order to make an impact on the lives of those who are so socially excluded that they cannot join the mainstream of our society, they need to receive an increase well beyond an earnings link. They need the targeted help that only the Government's policies will bring. Therefore, I hope that your Lordships will support the Government's position tonight.

Baroness Turner of Camden: My Lords, I thank my noble friend for her explanation of government policy. Of course, she knows that I do not agree with it. I am grateful also to all noble Lords who joined in this very interesting debate. I share with the noble Earl, Lord Russell, his pleasure that so many people have come in to listen to my noble friend Lady Castle at this time of night. I believe that that is an enormous compliment to her.
	However, frankly, I do not accept the arguments that have been advanced from the Front Bench this evening. First, the two amendments taken together would mean that one begins from the basis of MIG, which the Government agree is the basic minimum that anyone should be expected to live on, and would build on that by adding to it earnings-related increases in the years to come. I still believe that that would be an effective and fair way of dealing with the whole pension problem.
	This evening, the Minister has repeated what she said in other debates: that many pensioners are extremely well off and that their incomes have risen faster in the past 20 years than have other incomes. I explained previously why I find that very difficult to accept, and perhaps I may do so again briefly.
	First, as the Minister knows, in my working life I had a great deal of experience of negotiating occupational pension schemes. Most such schemes do not provide for increases even as high as that of the retail prices index. Most have a provision under which they rise up to a maximum of 5 per cent per annum or the RPI, whichever is the lower. In addition, we know that the basic state pension has not increased anywhere near in line with earnings; it has simply kept pace with the retail prices index.
	Therefore, those two aspects of pension provision in this country meant that the structure simply did not exist for pensioner incomes to rise beyond the level of earnings; in fact, they rose nowhere near earnings, even if taken together.

Lord Davies of Coity: My Lords, I wonder whether my noble friend is able to help me. I understand that we are able to evaluate the extent to which state pensions have increased. If one compares the level of occupational pensions in 1979 with their level today, we know that not all, but most, occupational pension schemes are based on final salary payments. If that is so and incomes have risen over that period, will not the level of occupational pensions have increased directly in relation to the increases in income?

Baroness Turner of Camden: My Lords, one must understand that very few people, I regret to say, had pensions based on a working life of 40 years. Most people had a chequered work pattern which did not produce the maximum final salary. In addition, as I indicated, very few occupational pension schemes had RPI increases. A person would do quite well to receive a maximum increase of 5 per cent per annum. That was during a 20-year period when the retail prices index was sometimes way above 5 per cent.
	Therefore, the structure did not exist in the pensions provision industry to produce a situation in which over that 20 years pensioners would receive incomes in excess of the increase in earnings, which is what has been said from the Front Bench. That is what I meant when I said that I could not accept what had been said about the large increases that pensioners have received over the past 20 years.
	Beyond that, I quoted figures in relation to public sector pensioners which show that most people in the public sector are not receiving enormous pensions. In fact, according to the federation whose figures I quoted earlier, the majority of them receive pensions of between £6,000 and £8,000 a year. That is scarcely wealth.
	As I said earlier, most pension provision has been based on the assumption that people will receive the basic state pension in addition. With the basic state pension not having increased in line with earnings, which would have been expected 20 years ago when a large number of pension schemes were introduced, people will be much less well off than they expected.
	I said earlier that I disagreed with the arguments about pension provision being so excellent that if we increased the basic state pension, far too many people who did not need it would get it. I also pointed out that the well off would lose it all in income tax. I have no objection to the fact that I will lose all my basic state pension in income tax. However, I dislike that argument being used against people who are far less well off and who could very much do with an increase in the basic state pension.
	I return again to the argument about social insurance. Several noble Lords have said that the Government are doing the right thing in paying out only to the poorest people who need the money rather than giving money to people whom they do not think need it, but that is not what social insurance is about. The concept of social insurance that we have lived with for many years and that I believe to be the right policy--for many years this has been the policy of my party, the Labour Party--is that everybody pays towards it and people then receive a pension based on the fact that they have made those contributions. I do not know why we are departing from that principle, which I still believe to be right.
	Pension provision through the basic state pension is not a charity. It is something to which people believe that they have contributed and to which they therefore have a right. It is not at all surprising that so many pensioners feel hard done by, because the basic pension has not been increased as they expected.
	I do not intend to seek a vote on this issue this evening, but it will not disappear or run into the sand. We may well come back to it on Third Reading.

Noble Lords: No!

Baroness Turner of Camden: My Lords, it is very late at night to vote on a major issue. It is 11.20 and we still have a right to come back to the issue at Third Reading. I repeat, I shall not seek a vote at this time of night because I think it inappropriate to start voting so late on something that many of us regard as very important. I think it wrong to call a vote at 11.20 and I never gave any indication that I would do so. I therefore beg leave to withdraw the amendment.

Noble Lords: No!

Viscount Simon: My Lords, is it your Lordships' pleasure that the amendment be withdrawn?

Noble Lords: No!

Viscount Simon: My Lords, the Question is, That the amendment be agreed to.
	On Question, amendment negatived.

Lord Graham of Edmonton: moved Amendment No. 72:
	After Clause 37, insert the following new clause--
	:TITLE3:INCREASE OF BASIC RETIREMENT PENSION
	(" . The weekly rate of the basic retirement pension shall be increased in April each year in line with--
	(a) the percentage increase in the general level of earnings during the preceding year; or
	(b) the percentage increase in the retail prices index during the preceding year;
	whichever is the greater.").

Lord Graham of Edmonton: My Lords, in view of the fact we have been told constantly this evening that Amendments Nos. 71 and 72 hang together and as this is a very important subject, I beg to move Amendment No. 72.

On Question, Whether the said amendment (No. 72) shall be agreed to?
	Their Lordships divided: Contents, 6; Not-Contents, 84.

Resolved in the negative, and amendment disagreed to accordingly.
	Clause 38 [Preservation of rights in respect of additional pensions]:
	[Amendment No. 73 had been withdrawn from the Marshalled List.]
	House adjourned at twenty-five minutes before midnight.